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French Version

Research center critical of mobile privatization (Daily Star)

A leading Arab research center said Tuesday that the unilateral cancellation of the cellular licenses may undermine the government’s efforts to get a good price for two mobile licenses.

“We believe that unilaterally canceling a signed Build-Operate-Transfer agreement with international operators diminished the confidence of many potential new entrants into the Lebanese communications markets.

We expect any future entrants to factor in this low confidence into their financial bids, translating into lower than fair-value bids,” the Amman-based Arab Advisers Group said in a 55-page report on the Lebanese telecom sector.

The government revoked the licenses of cell-phone operators Cellis and LibanCell last year to pave the way for privatization.

Prime Minister Rafik Hariri hopes to generate between $2 billion and $3 billion from the sell-off. All the proceeds of privatization will be used to reduce the $31 billion public debt.

The government is also hoping to sell part of the fixed-line telephone company this year.“Despite plans to privatize and liberalize the fixed sector, the Arab Advisers Group doesn’t foresee spectacular growth in this segment. Between 2002 and 2007, we project Lebanon’s fixed telecom market to grow by only 1.9 percent and maintain a penetration rate of around 21 percent,” said the group’s senior analyst, Sami Sunnaa.

He added that the competition for international long distance services is projected to cause Lebanon’s total revenues to decline annually by 3.9 percent to reach around $415.8 million in 2007, compared to around $507.8 million in 2002.

However, the group predicted growth in the Lebanese market for Global System for Mobile communications (GSM). “The GSM market is expected to grow substantially during the forecast period and the market will remain a predominantly pre-pay market. The Arab Advisers Group projects Lebanon’s GSM market to grow by a 16.7 percent to reach a penetration level of 42 percent in 2007.

It added that the number of cellular subscribers is projected to exceed the number of landlines in 2003. Lebanon’s total GSM revenues are projected to reach more than $884.7 million in 2007.

The report also commented on the new telecom law.“The new telecom law in Lebanon, expected to be enacted by Parliament during 2003, will achieve the goals of separating regulation from operation.”

The law is designed to reform the sector and will create a separate regulatory body and a telecom operator, Liban Telecom. It will also become the foundation for the required legal framework for privatization and make government involvement transparent and well defined.

The report provides five-year forecasts for more than 40 demographic, economic and telecom infrastructure indicators. Telecommunications Minister Jean Louis Qordahi still has differences with Hariri and his team over the privatization.

Qordahi and his supporters argue that it would be a fatal mistake to sell the cellular licenses at this stage, because the price will be far lower than actual value.

Beirut 24-03-2003
Osama Habib
The Daily Star

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