High hopes for new GSM licences

15 October 2001

The government has set a target for the amount it hopes to raise from the sale of two GSM licences. Following the early-October appointment of HSBC Investment Bankingas the financial adviser for the sale of two 20-year cellphone licences, a Telecommunications Ministry official said the government hoped to raise at least $3,000 million from the deals. Senior telecoms executives say it is extremely unlikely that Lebanon will be able to raise such a sum, given the depressed state of the global market and the pattern of recent GSM licence sales. The government aims to use the proceeds of the sale to reduce its debt, which is now estimated at more than $25,000 million (MEED 28:9:01).

The licences will replace two build-operate-transfer (BOT) contracts with France Telecom Mobile Liban (FTML), which operates the Cellis network, and Libancell. Both 10-year contracts were revoked in June. The previous government, headed by Salim al-Hoss, rejected offers of $1,350 million each from FTML and Libancell for the BOT contracts to be converted into 20-year licences. Neither company has ruled out submitting bids next year, but Lebanon is pinning its hopes on strong international competition for the operating contracts. Several European operators have already approached the government to express an interest in the licences, the ministry official said.

The government hired consultant KPMGin August to determine the compensation due to Libancell and FTML under the terms of the original contracts signed in 1994. Dewey Ballantineand Clifford Chancehave been awarded subcontracts to advise on legal issues.

Analysts say prospective bidders for the Lebanese licences will be conscious of prices offered for other GSM licences in the region . In August, Orascom Telecomof Egypt made a successful bid of $737 million for a GSM licence in Algeria. This price was 75 per cent higher than that of the only other bidder. In neighbouring Tunisia, the government's plans to sell a private GSM licence in August were aborted after the highest bid of $381 million, from a consortium of Spain's Telefonicaand Portugal Telecom, was considered unsatisfactory and the tender cancelled (MEED 17:8:01).

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