Beirut cuts tariffs for Zain and Orascom

08 February 2009
Improved terms for operators of state-owned mobile networks are aimed at increasing customer numbers.

Lebanon will allow the country’s two mobile network operators to cut their tariffs and retain a share of revenues from 1 April, in an effort to boost the country’s telecoms market.

In January, Kuwaiti telecoms operator Zain and Egypt’s Orascom Telecom signed management contracts to run the two state-owned networks until 1 April 2010.

Under the current system, they are paid a lump sum fee for running the networks, which gives them little incentive to increase their customer numbers. As a result, the country has one of the lowest mobile phone penetration rates in the region, with just 1.4 million mobile customers out of a population of 5 million.

“As of 1 April, [the networks] will have an incentive,” says Kamal Shehadi, chairman and chief executive officer of Lebanon’s Telecommunications Regulatory Authority (TRA). “The new contracts reward the managers based on the number of subscribers. Under the old contracts, they were only rewarded based on a lump sum. Every additional subscriber meant they had an additional charge on their network.”

The government will also cut the levy it imposes on all mobile phone contracts.

According to one source at the Telecommunications Ministry, mobile phone tariffs could fall by as much as 40 per cent on 1 April, a move that is expected to lead to many Lebanese consumers buying mobile phones for the first time.

The source says the two operators could sign up to 400,000 new customers within one month of the new charges being introduced.

According to US-based data provider Wireless Intelligence, Orascom Telecom has 680,000 customers on its MIC1 network, which trades as Alfa, and Zain has about 760,000 on the MIC2 network, which it operates under the MTC-Touch brand.

Shehadi says the TRA was unwilling to allow the operators to give the networks an incentive to increase their customer numbers until they had proved their willingness to stamp out Lebanon’s black market in mobile phones.

“The black market was produced by the inadequate distribution systems put in place by Alfa and Zain,” says Shehadi. “Black market SIM cards sell for two or three times the real price.”

The new tariffs should give Orascom and Zain an incentive to stop their SIM cards being sold on the black market.

Both the Telecommunications Ministry and the TRA want to privatise the state-owned networks, but they have repeatedly delayed the auction of the two networks because Lebanon’s unity government has yet to approve the sale of the assets.

“By definition, the management contracts are not the best that we could have in Lebanon,” says Shehadi. “The best option would be private sector-owned operators.”

The Telecommunications Ministry and the TRA have agreed to postpone preparations for the privatisation of the two networks until after Lebanon’s parliamentary elections in June.

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