Auction of Lebanese cellular networks set for February 2008
Zawya weekly newsletter 10-16th October 2007



10 October 2007

BEIRUT: The final auction for Lebanon's two mobile networks has been scheduled for February 2008 after the regulatory authorities and concerned parties agree to technical requirements for the process, senior officials said on Tuesday. The presidents of the Telecommunications Regulatory Authority (TRA) and the Higher Privatization Council (HPC) told The Daily Star they have prepared the invitation for applications by companies seeking to bid for the licensing.
Interested companies will be allowed to buy two-thirds stakes in each of the cellular networks, while the government will retain a third of the shares.

The government will then issue an initial public offering (IPO) from its one-third stake in each company so the public can buy shares on the Beirut Stock ExchangeBeirut Stock Exchange.
The companies will have the rest of October and November to study the information provided by the TRA and HPC and they will be expected to present technical bids in January final ones in February.

"The information will be made public in a couple of weeks so that interested companies can get a good idea about the state of the telecom sector and the conditions for applications," HPC President Ziad Hayek said.

According to the original five-year plan submitted to the Paris III donor conference in January, the government was supposed to privatize the mobile sector in the third quarter of this year.
But the spate of assassinations and heightened tensions between the government and the opposition have apparently delayed this process.

"This government is setting the process in motion so that the next Cabinet that will be formed after the election of the president can continue the work of the previous government," Hayek said.

He stressed that the current government is not qualifying any participant and not taking any decision on the auction.

"Everything will be done through the new government and the new president of the republic," Hayek said.

Telecommunications MinisterTelecommunications Minister Marwan Hamadeh has said that the government hopes to fetch between $5 billion and $6 billion from the licensing of the two cellular networks.

Lebanon has a little more than 1 million mobile users who generate more than $750 million in net revenues for the government each year.

At present, MTC TouchMTC Touch and AlfaAlfa are operating the two mobile networks on behalf of the government in return for a monthly fee of $4 million each.

Hayek said that the government has the right to change any of the conditions that are in the call for bids.

He suggested, however, that it will be difficult for the next government to shelf or kill the auction process because the contracts with MTC TouchMTC Touch and AlfaAlfa are scheduled to expire in May and June of 2008.
"We have to give the two companies six-month notices before the expiry of the contracts," Hayek said.
TRA President Kamah Shehadi, told The Daily Star that the auction would be the most transparent and competitive process in Lebanon's history.
"The entire auction process will be broadcast live and in the presence of the press in order to show that we have nothing to hide," Shehadi said.

He added that between seven and eight companies have expressed keen interest in bidding for the 20-year licenses.
Shehadi said that there is no target for the privatization of the mobile sector in Lebanon.
"We have made it possible for bidders to participate in the process," he added.
Shehadi stressed that any consortium seeking to bid for the license must include an experienced mobile operator.
"This operator must acquire a minimum of 15 percent of the entire stake of each mobile network," he added.
The consortium may consist of mobile operators and financial companies.
To ensure that the public is better served, the TRA insisted that experienced mobile operators must at least manage the new companies even if they do not have majority stakes in the new licensees.

The government stressed that the proceeds of privatization will be used solely to retire part of the public debt that now exceeds $41 billion.

Officials and telecoms experts say that privatization has plenty of potential medium- and short-term benefits such as reducing cellular charges and encouraging more foreign companies to make investments in the country.

Article originally published by The Daily Star 10-Oct-07