Lebanese government fires mobile operators

The Higher Council for Privatisation in Lebanon has abruptly terminated the build-operate-transfer contracts for the countries two mobile network operators, Cellis and Libancell.

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By  Rob Corder Published  June 13, 2001

The Higher Council for Privatisation in Lebanon has abruptly terminated the build-operate-transfer contracts for the countries two mobile network operators, Cellis and Libancell.

In a decision that is sure to send shockwaves through the international investor community within Lebanon, the operators contracts were cancelled without recourse.

The decision, according to a report in Lebanon’s Daily Star newspaper, was taken after two marathon meetings of the council chaired by Premier Rafik Hariri on Monday and Tuesday.

“The companies will be notified” Wednesday (today), said a late-night statement released by the council, which comprises senior Cabinet members, including Finance Minister Fouad Siniora, Economy Minister Basil Fuleihan and Telecommunications Minister Jean-Louis Qordahi.

The BOT contracts for Libancell and Cellis were due to expire in 2004, but long-running fights over license fee payments to the government have soured relationships between the operators and Lebanese authorities.

The Higher Council for Privatisation said that all parties had reached an “amicable” agreement. That seems unlikely given the tone of discussions leading up to the announcement.

In May, for example, Libancell’s chairman and general manager, Hussein Rifaï, lambasted the negotiation process over the license dispute. In an open letter on www.gsmlebanon.com, referring to BOT transfer-to-license negotiations in April, Rifaï said: “We were astonished on Monday April 17, to hear the Minister announcing the failure of the negotiations and end them unilaterally. We were stunned even further by the decisions of the Council of Ministers on April 19, which could only lead to terminate the Company’s activities. It is deplorable to realise that our detractors barely know the BOT Contract terms, our figures, and the real story behind the GSM crisis. The members of the Parliament themselves asserted their lack of knowledge on the subject requesting information and documents. All the recent developments indicate that the Council of Ministers’ knowledge of the Contract and of the file is equally superficial. We firmly refuse all the allegations we are accused of, and will be regrettably forced to recourse to international arbitration as per the contract’s stipulations.”

So far, there have been no public announcements either Cellis or LibanCell, but the Daily Star reported that sources close to the council said that both had been notified in advance that the premature termination of the 10-year BOT contracts was a “strong possibility.”

An astonishing twist in the tail of this story is that the Lebanese government has left the door open for both Cellis and Lebancell to bid for tenders to operate the networks they have just been stripped of.

An open tender will be issued internationally for the licenses as part of Lebanon’s drive towards full privatisation of the telecommunications sector.

Mobile customers have been assured that their services will not be interrupted by the contract termination.

The termination will take effect in 180 days and an “international bank or financial institution” will be contracted to assess the companies’ losses and determine the amount of compensation Cellis and LibanCell are entitled to.

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