Waiting game

The head of Lebanon's regulator on how to improve competition in the country's mobile sector.

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By  Administrator Published  December 26, 2008

The head of Lebanon's Telecoms Regulatory Authority, Dr Kamal Shehadi, tells CommsMEA what needs to be done to improve competition and the level of service in the country's mobile sector.

For Dr Kamal Shehadi, chairman and chief executive officer of Lebanon's Telecommunications Regulatory Authority (TRA), the protracted privitisation of Lebanon's two state owned mobile networks is an obstacle that is blocking a range of key reforms in the country.

At present, both networks are run under management contracts, with the largest operated by Zain subsidiary MTC Touch and the other by Alfa, which is part of Lebanese telecommunications company Fal Dete, which is in turn owned by a consortium of German and Saudi Arabian companies.

I have no illusions about what needs to be done to sort out the telecoms mess in Lebanon. - Dr Kamal Shehadi.

Mobile penetration is currently languishing around 33% (MTC Touch has 800,000 subscribers, while Alfa claims 550,000) - considerably lower than most of its Middle Eastern neighbours - and Shehadi says it will struggle to grow unless both companies are turned over to private investors.

"Management contracts did not give any financial incentive to increase the number of subscribers, quite the opposite. Every additional subscriber to them meant more work, more effort for a fixed sum, and so they had no interest in increasing the number of subscribers," he says.

Shehadi says that so far 10 bidders have expressed an interest in purchasing 67% stakes in the networks (with the remaining 33% to be offered to the Lebanese public), with due diligence already completed. But he says the process has been "on hold" without any indication of timescale from the government.

Requirements have been set out in the draft licence and in separate documents published earlier this year that detail the levels of quality of service the TRA expects from the new mobile operators.

Shehadi says that the ministry has shown interest in investing in the networks in the past two months, but prior to this, it suffered from eight years of neglect.

"With every delay that we see in the mobile privitisation we see delays in the growth of mobile subscribers, a drop in prices, improvement of the quality of service, and a delay in much needed investment in the sector. And what we are seeing as well is the consumers getting a less than acceptable customer care," he says.

"As long as the networks are not privatised and they are not being invested in to improve the quality and are not working quickly to lower prices I expect complaints to keep rolling in and for things to get worse. I have no illusions about what needs to be done to sort out the telecoms mess in Lebanon. It all starts with a clear policy decision which to this point has been made in declarations and statements but in effect has not been translated into any real action and really that's what will make a difference to trigger telecoms reform."

Shehadi explains the reasons for the delay: "What's holding it up is a desire by the minister of telecoms to see what conditions in the tender documents and the tender rules need to be changed so that the government can get a higher level of participation by Lebanese share holders. That was the main driver. I think it should be clarified before the end of the year," he says.

The TRA boss says that even if the government were to give it the go-ahead today, bidders would be given eight weeks to prepare their technical bid, before an auction takes place and the winner is announced live on television.

Price concerns

The value of the two operators to the Lebanese government, including VAT, is US$900 million per year, and is estimated to provide the state with one third of its income.

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