Lebanon Awards Management Contracts for State Owned Mobile Networks

The Lebanese government has awarded management contracts to Egypt's Orascom Telecom and Kuwait's Zain to operate the two state owned mobile networks, reports the Reuters news agency, citing a cabinet statement. The contracts to manage the networks had expired last month and persistent delays in plans to sell the networks required either an extension to the existing management agreements, or new partners.

According to local media reports, the new management contracts are worth US$145 million and will last for twelve months, starting from next month. A one year management contract will fuel rumours that the long-planned privatisation of the networks will not happen this year - putting further pressure on government finances.

The Finance Minister, Mohammed Shatah warned that the failure to sell the networks would push up the cost of servicing the government debt by around US$450 million.

The networks are tightly regulated and unable to expand their services without government permission and as a result the two networks are straining under their traffic load with a huge number of potential customers waiting for a connection. The Mobile World notes that the two operators have some 1.28 million customers between them, representing a population penetration level of 32%.

Lebanon's two operators were originally set up under a 10-year Build-Operate-Transfer (BOT) agreement, back in June 2001, the government controversially cancelled the BOT licenses held by LibanCell and Cellis which were not due to expire until 2004. The government then invited bidders to manage the networks on its behalf.

A plan to sell the networks for around US$3 billion each has been on and off for well over a year.

Lebanon's Telecommunication Minister, Jebran Bassil recently announced that mobile tariffs - reported to be some of the highest in the world - would be reduced. He said that the high call costs are an effective tax on consumers and the government shouldn't be relying so heavily on them in the future. The government earns on average US$1.3 billion a year from the phone networks - equivalent to some 27% of its total tax income.

On the web: Mobile World - Reuters

Posted to the site on 13th January 2009