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Mobile networks to run for less? Government hopes to negotiate lower charges with operators (Daily Star)

Committee hopes to offer a 3 year contract to the current companies if they agree to lower their management fees

A Cabinet committee headed by Deputy Prime Minister Issam Fares may recommend a re-negotiation with Cellis and LibanCell to reduce the monthly fee charges for managing the mobile networks. “The committee plans to advise the government to grant three year management contracts to the current operators if they agree to lower the management fees from $7.5 million to less than $6 million for each network,” a source close to the committee told The Daily Star on Monday.

The committee was formed last month to investigate why four companies pulled out early from the mobile phone auction and tender process.

Only LibanCell and Investcom made serious offers to manage the two networks for three years. Each company offered about $6 million for the management contract. “Fares and a number of other ministers argue that the government can save up to $3 million each month if the management contracts are awarded to the existing companies under different terms,” the source said.

He added that most ministers at the committee rejected Telecommunications Minister Jean-Louis Qordahi’s proposal to create two public entities to run the networks. “Fares and many ministers feel that the government should have no direct or indirect involvement in the management of the mobile networks.”

Various telecommunications experts said that Qordahi, who is allied with President Emile Lahoud, was gradually losing support because he failed to run the networks in a professional manner. They added that Lahoud was embarrassed by Qordahi’s failure to negotiate better terms for the government.

According to one telecommunications expert, “the minister persuaded the Cabinet to install special devices to determine the exact amount of traffic on the mobile networks because there was suspicion that the two companies were hiding some of the revenues from the state.”

The devices were installed six months ago. However, Qordahi declined to release the results of these findings, prompting some ministers to say that the companies were not involved in any foul play.

Prime Minister Rafik Hariri’s allies also claim that Qordahi deliberately torpedoed the auction and tender process to justify the creation of two government entities to manage the networks. But the minister repeatedly rejected these accusations, hinting on numerous occasions that Hariri had a vested interest in allowing LibanCell and Cellis to continue to manage the networks.

Nizar Dalloul, the owner of LibanCell, is related to Hariri while 35 percent of Cellis is controlled by the Mikati Group, whose chairman of board is the brother of Public Works and Transport Minister Najib Mikati.

Former Telecommunications Minister Issam Naaman was one of the few voices that called on the government to prevent Cellis and LibanCell from taking part in the auction and tender process. Namaan claimed that the two companies had violated the terms of the contracts that were signed with the government in 1994.

The two companies are locked in a long running legal dispute with the government over alleged violations of the contracts. The case has been referred to international arbitrators in New York and Paris, but most experts believe that the companies have a good chance of winning the case.

The government may also abandon plans to create a regulatory body to oversee all auctions and tenders. The creation of a regulatory body was stipulated in the telecommunications law that was passed by Parliament in 2001. “Qordahi received two big setbacks: the first was when the government rejected a plan to create two entities to run the networks and the second was when Fares avoided discussing the creation of a regulatory body,” a source said.

If Cellis and LibanCell agree to reduce the management fees, the government will try to securitize part of the future telecommunications revenues in order to reduce the $32 billion public debt.

Beirut 02-02-2004
Osama Habib
The Daily Star



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