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Qordahi favors privatizing mobile networks but not at any price (Daily Star)

Telecom minister says if offers are too low, Cabinet will reject outright bids and opt for 3-year management-only license

“The telecom sector is the oil wealth of Lebanon,” a phrase that has been repeated numerous times in the last few years by officials, past and present.

A brief look at the gross revenues of this sector shows that the argument is valid. Experts say that the Finance Ministry heavily relies on the significant revenues from the telecom sector to ease the government’s mounting deficit. But the question which lingers in the minds of economists and politicians is whether the government should sell the cellular networks at any price to minimally reduce the $32 billion public debt.

Telecommunication Minister Jean Louis Qordahi, who has handled the controversial telecom sector file since he took office two years ago, avoids giving a hasty answer on this subject. “I am in favor of privatizing the cellular networks but not at any price or condition,” the minister told The Daily Star in an interview. But Qordahi stressed that it’s up to the Cabinet to approve or reject the offers from the companies.

His comments came only a few days after the Higher Privatization Council launched the tender and auction of the cellular companies. The five bidding companies have 60 days to submit their offers to the council for both the tender and auction.

International investment bank HSBC, which was appointed by the government to provide advice on the privatization of the cellular networks, will express its opinion on the offers of the companies. Qordahi will then review HSBC reports and put his own remarks before passing it to the council and the Cabinet. “If we think that the offered prices were too low, the Cabinet will opt for the second choice, which is management of the networks for three years,” Qordahi said.

The bidders have one of three options: to bid outright for the licenses, to bid for a three-year management-only license, or to bid for a 20-year GSM license, with a clause stipulating that 40 percent of revenues would be paid directly to the government.

LibanCell, Luxembourg’s Investcom Holding, France’s Orange, Greece’s OTE and Kuwaiti-based Mobile Telecommunications Company have already qualified to bid.

Detecon, a German company, is only qualified to bid for the operating license under the Higher Privatization Council’s criteria, and Kuwaiti company Wataniya Telecommunications was disqualified on grounds of not having enough experience to run the networks. Privatization is a key element in the government’s reform plans to reduce the public debt.

Qordahi said that he had great confidence in the future of the telecom sector, noting that the net revenues from the two cellular companies had risen considerably since the ministry took full control of the networks, which are still managed by Cellis and LibanCell on behalf of the ministry.

According to Qordahi’s records, which were made public two weeks ago, the ministry transferred $659.59 million to the Finance Ministry between September 2002 and August 2003, a major increase on the same period in 2001 of $436.62 million. The revenues included both the cellular and fixed lines networks. “The average revenue of the last 12 months was more than $49 million per month from the cellular networks.”

Qordahi said that the government did not set a minimum price for the networks, and declined to comment on reports that the government will not accept any offer which falls below $1.6 billion for each GSM license.

Asked about the possibility of a clash in the Cabinet over the offers made by the firms, the minister made it clear that he was eager to privatize, but under certain terms and conditions. “There are some people who want to sell the networks under any condition. I am not in favor of this view,” he said.

Qordahi underlined the need for the total liberalization of the telecom sector before putting it up for sale. “Privatization is not a sale process only. Privatization is a liberalization, regulation and privatization process.”

He said one could not talk about shifting the state monopoly to the private sector without liberalizing and regulating the market. “We should establish a regulatory body and offer fair and equal chances for all companies to compete in the market. We should also avoid, with all means, turning a state monopoly into a private cartel,” Qordahi said.

Commenting on some reports that the international market conditions were not encouraging for Lebanon, the minister said the country’s circumstances were different from others. “Lebanon has one of the highest usages of cellular phones in the world. We have a steady business and one with a steady cash flow.”

He added that Lebanon has a 21 percent penetration rate in the cellular market and that the country could easily reach 30 percent to 40 percent penetration in a very short period of time. “Within the next 12 months, our market will definitely reach 40 percent penetration because the market is showing a great appetite,” he said.

Qordahi said that Lebanon should expect an exceptional price considering the high growth of the telecom sector, but admitted that the regional situation was one of the few factors that discouraged some firms from offering a high price for the licenses. “That’s why the government may consider a three-year management of the networks if the price is not right,” he said.

According to Qordahi, the government would also consider securitizing some of the revenues of the cellular networks if privatization fails.

Qordahi also said that the World Bank and International Monetary Fund were pleased with the work of the Telecommunication Ministry, stressing that these international organizations agreed that the liberalization of the sector should precede privatization. To meet the growing demand for cellular lines, the minister ordered the mobile companies to issue another 40,000 lines.

The ministry has also increased the number of fixed telephone lines and introduced new services such as prepaid cards for fixed-line phones.

Qordahi believes that the telecom sector will contribute to the growth of the economy. “We cannot tackle the public debt if we don’t help our economy and create more jobs. One way to do that is to boost the telecom and IT sector in Lebanon,” he said.

Qordahi said that the ministry was studying several plans to enhance internet access in Lebanon, adding that the high speed DSL service remained under consideration by the Cabinet.

Beirut 27-10-2003
Osama Habib
The Daily Star



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