Lebanese GSM crisis is nearly over, predict analysts

Lebanon's 18 month old GSM crisis is on the verge of being resolved with the introduction of legislation to reorganise the telecoms sector.

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By  Greg Wilson Published  March 31, 2003

Lebanon's long term GSM crisis is on the verge of being solved with the introduction of legislation to reorganise the telecoms sector. The proposed telecoms law will separate regulation from operation with the establishment of an independent regulator and a telecom operator, to be called Liban Telecom.

“The long GSM crisis in Lebanon, that has crippled growth in the market since June 2001, is on the verge of resolution,” comments Arab Advisors Group’s senior analyst, Sami Sunna.

The pending legislation creates the foundation for the legal framework to privatise the sector and make all government involvement in the industry transparent.

Problems in the Lebanese mobile sector began in mid-2001, when the Lebanese government demanded that the existing GSM license holders, Cellis and LibanCell, pay an additional US$300 million each for exceeding the subscriber limit on their licenses. When both operators refused, the government attempted to terminate their build, operate, transfer (BOT) contracts early.

After various legal twists & turns the matter found its way to international arbitration.

At the end of last year, government offered US$178 million in compensation for early termination of the contract, however, both operators refused to endorse the transfer of ownership.

Since then, the situation has been resolved, and ownership transferred. “There has been a transfer of ownership of both operators, LibanCell and Cellis, to the hands of the Lebanese government after the two operators were compensated. The next step in Lebanon is the sale of the two GSM operators, expected in early 2003, and further liberalisation of the telecom sector,” adds Sunna.

However, after the trouble of the last two years, the confidence in the Lebanese GSM market is likely to be low. Arab Advisors Group predicts, that market low confidence will impact the bids for the GSM licenses.

“Despite plans to privatise and liberalise the fixed sector, the Arab Advisors Group does not foresee spectacular growth in this segment. Between 2002 and 2007, we project Lebanon’s PSTN market to grow by a CAGR of 1.9% only and maintain a penetration rate of around 21%,” explains Sunna.

“Competition on the international long distance service is projected to cause Lebanon’s total PSTN revenues to decline annually by 3.9% to reach around US$415.8 million in 2007, compared to around US$507.8 million in 2002,” he adds.

Despite the lack of confidence of behalf potential licensees, the Lebanese GSM market is full of potential. According to Arab Advisors Group, the market will grow by CAGR 16.7% to reach market penetration of 42% in 2007.

The number of cellular subscribers is projected to exceed the number of mainlines in 2003 after briefly exceeding them in 2001 (before the start of the GSM crisis which stifled GSM growth). Lebanon’s total GSM revenues are projected to reach more than US$884.7 million in 2007.

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