Beirut faces further delay to $6bn telecoms privatisation

17 July 2008
Auction of state-owned mobile networks set to be put back beyond November.

Lebanon’s Telecommunications Ministry expects the privatisation of the two state-owned mobile phone networks to be delayed beyond the deadline of November, despite the appointment of a new government of national unity.

Civil servants are now in talks with the two private companies that manage the state-owned networks to extend their contracts beyond November, when their management deals are due to end and the networks will be sold off.

The new government, which was appointed on 11 July, has a relatively short space of time in which to privatise the networks before Lebanon’s next parliamentary elections, which are due to take place in May 2009.

If it fails to hold the auction before then, the process may be delayed until as late as November 2009, a year after the ministry wants to privatise the networks.

“Negotiations are taking place to see if we are going to renew with them [the private operators] or not,” says Gilbert Najjar, the civil servant in charge of the privatisation. “Within the coming months we will find out.”

The two networks are currently managed by MTC-Touch, a subsidiary of Kuwaiti telecoms company Zain, and Alfa, a joint venture of Deutsche Telekom and Saudi Arabia’s Fal Holdings.

The Telecommunications Regulatory Authority, which will auction off the two networks, has yet to confirm that the privatisations will be delayed. “The extension of the contracts or negotiating an extension is a cautionary measure,” says Kamal Shehadi, chairman and chief executive officer of the regulator.

“In the best-case scenario, we may need another 30 or 60 days [beyond the end of November].

“In the worst-case scenario, we need an extra number of months. It [the extension] will be just enough to get to privatisation.”

The ministry gave Zain and Alfa six-month extensions to their management contracts at the beginning of the year, after it had become clear that the country’s political crisis would prevent the sell-offs from going ahead before the original contracts with the two groups expired at the end of May.

Any further extensions to the management contracts are likely to be for a period of six or 12 months. However, even if these are agreed, the regulator insists that they will not stop it from holding an auction once the Council of Ministers gives its approval. “Even if it gets to an extension, there will be an early termination clause,” says Shehadi.

In October 2007, former telecoms minister Marwan Hamadeh claimed that the networks, which are expected to be sold with 20-year licences, would be worth as much as $3bn each.

It is a figure backed by Swiss investment bank Credit Suisse, which predicted in November 2007 that the networks would be sold for $2.4-3.4bn each.

According to Shehadi, 10 international telecoms operators have signed expressions of interest in the networks and an undisclosed number have contacted the telecommunications regulator with requests for further information on the licences.

Several telecoms firms from within the region, including the UAE’s Etisalat, Egypt’s Orascom Telecom, Qatar’s Qtel and Zain, are among the 10 firms that have expressed interest.

The telecoms sell-off is part of a wider programme of privatisations planned by Beirut.

International companies are also waiting for the new national unity government to award two long-delayed contracts to manage the assets of power company Electricite du Liban, which is heavily loss-making (MEED 6:5:08).

“We are very excited about the new minister coming on board,” says Mounir Ayntrazi, project director at the US’ CRA International, the consultant on the scheme. “We could not award contracts until the government was set up.”

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