10 October 2008

BEIRUT: The global credit crunch and wait-and-see approaches by many Gulf Arab investors may prevent the privatization of Lebanon's cellular networks in the foreseeable future, some economists warned on Thursday. "This may not be the time to invite foreign and Arab companies to bid for the country's two cellular networks. The financial crisis may turn into a recession in 2009 and of course this will have an impact on the region in general," economist Kamal Hamdan told The Daily Star.

This view was echoed by Edward H. Gardner the International Monetary Fund's (IMF) senior representative in Lebanon, during a lecture at Beirut's Phoenicia InterContinental Hotel on Tuesday.

Gardner said that what remains important is that "privatization is ready to go when market conditions are right."

"Obviously," he added, "you don't want to privatize in a market where there is no credit."

The government has delayed the privatization of the cellular networks many times over the past four years due to the volatile political and security situations in the country.

The previous government was hoping to raise more than $6 billion from the privatization of the mobile companies but experts have warned that the state may not be able to get such prices amid poor market conditions.

"A credit crunch means that investors will be less inclined to put their money on projects," Hamdan explained.

He added that the IMF projected very low GDP growth in the US and some European countries and if this trend continues then the region will be hit by a recession.

"I don't think it is feasible to open the privatization file at this moment. We have to wait until the picture becomes more clear," Hamdan said.

Hamdan also noted that Lebanese banks are reporting impressive deposits inflows from the oil-rich countries, "but these deposits are short-term. Investors usually keep these deposits for two or three months, collect the interest and leave the country."

Former Finance Minister Demanous Kattar told reporters on Wednesday that the privatization of the country's cellular lines may not be advisable now because the government is unlikely to fetch prices that reflect their real value.

He advised the government to postpone the privatization of the cellular networks until the market becomes more stable.

Ziad Hayek, the president of the Higher Privatization Council (HPC), said the government had no intention of launching the auction of the cellular networks anytime soon.

"Let's be clear about privatization. Selling the mobile lines is a long-time process. We all know that the time is not ripe to auction off the telecom sector," Hayek said.

He added that HPC, the Telecommunications Ministry and the Telecommunications Regulatory Authority were drafting new legislation on the matter, and "we hope to draft the law before the end of the year and then pass it to Parliament."

He added that the legislation would stipulate that 67 percent of the cellular firms be acquired by a consortium while the remaining 33 percent would be offered to the public through initial public offerings.

Louis Hobeika, professor of economics and finance at Notre Dame University, said Lebanon could still obtain a handsome price for the networks.

"The Gulf states are still flush with money and this money is looking for a sound investment. I think telecom is still a very good investment for any investor due to its very high revenues," Hobeika said.

He added that the Lebanese market was more relaxed than overseas ones and this would induce investors to look into more opportunities here.

© Copyright The Daily Star 2008.

 

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