Beirut braces for year-long upgrade

14 December 2007

Lebanon’s telecoms regulator says that the country’s two state-owned mobile phone networks can be fully repaired in less than 12 months after they are privatised in February 2008. “These are networks that require investment,” says Kamal Shehadi, head of the Telecommunications Regulatory Authority (TRA) “But I think it will take less than one year.”

The TRA and Lebanon’s Higher Council for Privatisation will jointly supervise the auction of the networks on 21 February 2008.

The networks have been managed by two mobile phone companies: Alfa, which is majority owned by a subsidiary of Deutsche Telecom; and Zain, the Kuwaiti operator, since 2004.

In November, Mohammed Shabib, general manager of MTC-Touch, Zain’s Lebanese subsidiary, told MEED that the network managed by his company needed up to 18 months to bring it up to the standard of Zain’s networks in other Middle East countries.

Shabib also said “about 50 per cent of the present network would need to be gradually replaced to bring it to 2.5G” (MEED 16:11:07).

Shehadi declined to say how much of each network will need to be replaced after the privatisations in 2008.

The new owners of the networks will be constrained only by their technical ability to meet the regulator’s key performance indicators, not the quality of the networks being sold off, says Shehadi.
“The operators will have to meet certain licence requirements. There is more than one way to deliver a network that meets the licence conditions,” he says.

“It is up to the bidders to see how they can best meet our technical requirements.”

Both networks use 10-year-old second-generation mobile phone technology, while most other countries in the region have upgraded to third-generation services.

The Lebanese government has invested less money in the networks than the private sector owners of networks elsewhere in the region.

Meanwhile, Gilbert Najjar, an official at the ministry in charge of mobile phones policy, has echoed claims made by Telecommunications Minister Marwan Hamadeh in October that each network will sell for $3bn. Najjar says research by investment bank Credit Suisse proves Hamadeh’s estimate is correct.+

A recent Credit Suisse paper argues that each mobile phone network is likely to sell for $3bn, within an overall price range of $2.4-3.4bn.

Najjar says Saudi Telecom’s $908m bid for a 26 per cent stake in Kuwait’s third mobile phone operator proves international telecoms companies are still prepared to spend heavily on new licence opportunities in the region.

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