LEBANON has earned a reputation in the Near East for driving a hard bargain in its efforts to restore telephone services to an acceptable level. Success in making international companies cut their prices dramatically has been noted in neighbouring countries, where companies negotiating telephone contracts have had to take into account the Lebanese factor.

The government is now carrying out a scheme to repair and upgrade exchanges and the line network for just over $500 million. If it had accepted the prices originally quoted by the contractors, the cost would have been about double that figure. The aim is to provide a total of 1.2 million lines in three years, compared with only about 200,000 operational lines now. There will also be a global system for mobiles (GSM) with a capacity of 250,000 lines.

The first stage in the restoration was to upgrade the exchanges. Posts, Telephones & Telecommunications Minister Mohamed Ghazairi explained at a 22 March press briefing in Beirut that it was decided at the start of 1993 to replace the existing mechanical exchanges with electronic systems. The total capacity of all the existing exchanges was 450,000 lines. 'We managed to secure a price of $80 a line, although the original lowest bid was three times that figure. When we reached $80 a line, we increased the total number of lines to 1 million.'

Contracts were duly awarded last year to Germany's Siemens, Alcatel of France and Sweden's Ericsson to install the new exchanges, at a total cost of $80 million. Work is now well under way, and will be complete by the end of 1995.

The next task was to place contracts for a public switching telephone network (PSTN), involving the installation of some 800,000 lines countrywide. Ghazairi said the prices submitted on 18 October 1993 were $720 million from Siemens, $729 million from Alcatel, $785 million from Ericsson and $870 million from Italy's Sirti. He said the prices were higher than expected, but savings were made by splitting the work up between the three lowest bidders, the same companies already working on the exchanges contracts.

On 10 March, contracts worth $430 million in total were initialled with the three companies. They comprised:

Alcatel - $130.7 million, 50 per cent of which will entail establishing and repairing local networks with about 225,000 lines. Some $34 million of the work will entail setting up digital connections by way of fibre- optic cable and microwave systems. The remaining work will entail construction of 35 new buildings and repairing 37 existing buildings.

Siemens - $153 million, of which $94 million will be for setting up local networks of about 350,000 lines. The remaining work will be on digital connections, expanding international telephone links, and on construction and repairs of a total of 72 buildings.

Ericsson - $147 million, including about $70 million for setting up local networks of 225,000 lines. Some $23.5 million will be for digital connections, and the remaining work will be for the construction of 97 new buildings and repairs to 41 buildings.

These contracts will be paid on a cash basis initially, but Ghazairi said there is a possibility of securing loans and grants to finance the work in its later stages. The contracts are for completion in 24 months.

The government is also preparing to award franchises to two or more operators for the GSM project. Bids for this were submitted at the same time as for the PSTN project. Companies in the hunt include Siemens, the US' Motorola, France Telecom and Finnish Telecom.

Lebanon's international telephone links are to be upgraded with the award in the next few weeks of contracts to AT&T of the US for an $8.8 million fibre-optic channel to Cyprus. Siemens is in line for a $5 million contract to set up a digital microwave link with Syria.

The priority being given to the telephone projects is a clear reflection of the ambition of Prime Minister Rafiq Hariri to establish Lebanon once more as a business centre for the Middle East. The speed with which the new projects are going ahead, despite the tough negotiations over price, shows just how determined the government is to realise this ambition.