Minister says new regulatory body needed to oversee mobile companies. Many believe the government has scrapped plans to auction 20-year licenses to public-sector companies.
On Friday, the Cabinet committee headed by Deputy Prime Minister Issam Fares will review reports on the auction and tender of cellular networks, amid growing indication that Lebanon has dropped the idea of selling the telecommunications licenses to the private sector.
Privatizing the telecommunications sector was part of a plan to raise billions of dollars in 2003, to help reduce the $32 billion public debt.
But the Cabinet’s decision last month to cancel the outcome of the auction and tender is likely to discourage investors from taking part in any future bidding.
Only LibanCell and Investcom made serious offers to manage the mobile phone companies for three years; the remaining four firms pulled out from the race for different reasons.
The most likely scenario is that new companies will bid only for the management of the cellular networks, since the offers to buy 20-year GSM licenses have been scrapped for good. Telecommunications experts believe that the government is convinced that the cellular network is “Lebanon’s oil wealth” and it would be absurd to sell them at any price.
Telecommunications Minister Jean-Louis Qordahi told the committee that it is more rewarding to keep the networks until the time is ripe to sell them to the private sector. In his report, Qordahi recommended speeding up the creation of the telecommunications regulatory body which will name the board of directors for the two companies. The regulatory body was mentioned in the telecommunications law that was ratified by the Parliament in 2002. This body, according to the telecommunications law, was supposed to organize the tender and auction of the cellular companies instead of the Higher Privatization Council which is under the direct influence of Prime Minister Rafik Hariri.
Qordhahi, who came under sharp criticism for failing to handle the auction and tender process, stressed that the Higher Privatization Council must take responsibility for the collapse of the tender. He added that the whole idea of organizing an auction and tender was wrong, claiming that Lebanon was the only country in the world to come up with this concept.
The minister also asserted that the council did not respond to the queries of the bidding companies, prompting many of them to withdraw with a bitter taste in their mouths. He added that the council raised the bank guarantee from $25 million for each company to $100 million.
The council, according to the minister, also made last minute changes to the terms of the contracts that were drafted by international investment bank HSBC.
The council stipulated that any company interested in bidding must have a minimum experience of five years in GSM networks and must also have a minimum of 350,000 subscribers. One telecommunications expert says that most of the Arab and international companies felt that the council was trying to award the contracts to the existing operators by making conditions impossible for anyone else to meet.
There were also objections to the participation of LibanCell and Francetelecom, which are locked in a legal dispute with the government.
The former government of Salim Hoss ordered Cellis and LibanCell to pay $600 million for allegedly exceeding the number of cellular subscribers. But the two companies rejected these allegations and referred the dispute to international arbitrators in New York and Paris.
Qordahi urged the Cabinet not to allow the two current companies to take part in the bidding because it will affect Lebanon’s chances of winning the international arbitration.
Former Telecommunications Minister Issam Naaman also favors the exclusion of Cellis and LibanCell from the bidding process. He supported Qordahi’s suggestion to create a regulatory body which will name the board of directors for the two companies that will run the networks on behalf of the government.
Against this backdrop, the Cabinet may be forced to comply with the demands of Qordahi to create the regulatory body as soon as possible in order to restart the bidding process all over again. This means that the Higher Privatization Council will be stripped of all its powers.
Osama Habib
© The Daily Star 2004
