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French Version

Political bickering holding up privatization of cell networks

Market still attractive despite crisis - report

Lebanon's two state-owned cellular networks represent some of the last growth markets available to regional operators, an international ratings agency said, but the unending political turmoil is keeping the networks' privatization indefinitely on hold.

Fitch Ratings said Lebanon's oft-delayed privatization would be one of the only chances for mobile operators to expand in the region during the next 12 to 18 months, in a report published in last weekend's edition of Byblos Bank's Lebanon This Week.

"The report confirmed what we have been saying for some time - that the investment in the Lebanese telecommunication market is a very attractive proposition," Kamal Shehadi, head of the Telecommunications Regulatory Authority (TRA), told The Daily Star on Sunday. "Not only is it important to the Lebanese ... it's also something that investors are very interested in."

State officials have long advocated the sale of the licenses, so that the windfall could go to pay down some of the country's $42.06 billion debt, an astounding 171 percent of Lebanon's gross domestic product and an amount which makes debt service the largest outlay in the nation's budget.

The TRA and the Higher Privatization Council announced in November that the privatization auction would be held on February 21, but the escalating political conflict has forced the auction's delay for at least three months.

Officials have not set a new date for the sale, instead informing prospective investors on the TRA Web site that the TRA will notify buyers a minimum of four weeks before a new deadline to submit minimum bids.

"That's less of a telecom question," Shehadi said when asked about the date of the planned auction. "That has to do with the political situation."

Each license could fetch as much as $3.5 billion, officials have said - an amount that would make a significant dent in the debt burden - but politicians' dithering is continuing to worsen the state's already feeble fiscal health, said Nassib Ghobril, head of research at Byblos Bank.

"As long as we keep delaying the process of privatizing the mobile licenses, this is another example of the opportunity cost we are incurring ... from the political turmoil," Ghobril said. "Those mobile licenses should have been privatized seven years ago. Our debt would definitely not be as high as it is today."

In its report, Fitch said the Middle East and North Africa region offered cellular operators precious few opportunities with legitimate growth possibilities, as the sector slowed and markets became saturated.

Lebanon can take solace in the fact that prices for mobile licenses should remain high, with the scarce number of available licenses and the wealth of cash flowing throughout the region, Fitch said in its report.

Regional operators have sought to expand by entering markets with low penetration rates - Lebanon's rate stands at about 25 percent - as the penetration level has passed 100 percent in their home countries, Fitch added. Penetration rates in Bahrain, Qatar and the United Arab Emirates have surpassed 150 percent, Fitch said.

Beirut 11-02-2008
The Daily Star

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