Identifier
Created
Classification
Origin
07BEIRUT1582
2007-10-10 14:40:00
CONFIDENTIAL
Embassy Beirut
Cable title:  

LEBANON: CABINET APPROVES TELECOM SALE

Tags:  ENIV PGOV PREL PTER LE 
pdf how-to read a cable
VZCZCXRO5792
PP RUEHAG RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHLB #1582/01 2831440
ZNY CCCCC ZZH
P 101440Z OCT 07
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC PRIORITY 9679
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHNO/USMISSION USNATO 1686
RHMFISS/CDR USCENTCOM MACDILL AFB FL
RHEHNSC/NSC WASHDC
C O N F I D E N T I A L SECTION 01 OF 02 BEIRUT 001582 

SIPDIS

SIPDIS

NSC FOR ABRAMS/SINGH/GAVITO/YERGER/DEMOPULOS, STATE FOR
NEA/ELA

E.O. 12958: DECL: 10/10/2017
TAGS: ENIV PGOV PREL PTER LE
SUBJECT: LEBANON: CABINET APPROVES TELECOM SALE

REF: BEIRUT 1546

Classified By: DCM William Grant for reasons 1.4 (b) and (d)

C O N F I D E N T I A L SECTION 01 OF 02 BEIRUT 001582

SIPDIS

SIPDIS

NSC FOR ABRAMS/SINGH/GAVITO/YERGER/DEMOPULOS, STATE FOR
NEA/ELA

E.O. 12958: DECL: 10/10/2017
TAGS: ENIV PGOV PREL PTER LE
SUBJECT: LEBANON: CABINET APPROVES TELECOM SALE

REF: BEIRUT 1546

Classified By: DCM William Grant for reasons 1.4 (b) and (d)


1. (C) Summary: The GOL cabinet approved the sale of two
mobile telephone licenses, with a call for bids this year and
a final sale in early 2008. The cabinet also approved hiring
of staff by the Telecommunications Regulatory Authority (TRA)
with temporary exemption from GOL administrative process.
Funding for the TRA is still an issue, since the cabinet did
not receive a proposal to grant the TRA an additional $3
million in budget support. End summary.

CABINET COMPROMISES,
APPROVES SALE
--------------


2. (C) At the end of a lengthy cabinet meeting on October 9,
2007, the GOL approved the sale of the two mobile telephone
licenses; the GOL will issue a call for bids in 2007 and
allow the next government to complete the auction in early

2008. Minister for Social Affairs Nayla Mouawad told the
Ambassador that one of the major issues for cabinet debate
was Minister of Telecommunications Marwan Hamadeh's request
that the license winners retain all the employees of the two
current non-governmental mobile telephone management
companies, Alpha and MTC, for 24 months after the sale.
Apparently the cabinet compromised with an approval of 18
months, motivated by concern about an immediate loss of jobs
at the two companies. Each company employs about 400 people.
Telecommunications Regulatory Authority Chairman Kamal
Shehadi confirmed that this would be a workable issue for
buyers, who would take this into account in their bidding.

HIRING APPROVED,
BUT TEMPORARY ONLY
--------------


3. (C) The other major decision made was a temporary
provision, with no time limit, to allow the TRA to continue
to hire up to forty employees on a contract basis, pending
compliance by the TRA with routine GOL hiring protocol for
civil servants. Shehadi says that he plans to "drag his
feet" in complying with the process, hoping that the 2008
budget proposal will include the promised exemption on this
point for the TRA. (Note: Previously Shehadi believed that
TRA employees would be exempted from the civil service, since
the TRA was intended to be an autonomous regulator. End
note.)

SALE SLATED FOR EARLY 2008
--------------


4. (C) The agreement on the sale of the two mobile licenses
included a number of provisions, and provided a timeline for
the sale. Although the public statement by the GOL stressed
that this process will be completely at the will of a new
government, Shehadi believes that it will be difficult to
stop the process once up and running, and that the GOL
understands that, but does not wish to sound an alarm.
(Note: the current government expires after the end of the
presidential term on November 24. The parliament should
elect a new president by that date, after which a prime
minister is selected and begins to form a cabinet. The
process of forming a new government has, in recent years,
taken two to four months from the time it started. End
Note.) One key point is the decision to sell two-thirds of
the shares to the bidder, while the GOL will retain
one-third. The GOL will be required to sell their shares via
an Initial Public Offering (IPO) within one year of the sale.
The dates for the sale are:
January 18, 2008 - Applications from bidders must be
received;
February 4, 2008 - Announcement of qualified bidders by GOL;
February 7, 2008 - Opening of financial bids.

FUNDING FOR TRA
STILL AN ISSUE
--------------


5. (C) A final issue troubling Shehadi -- the funding for the
TRA -- has yet to be resolved. Financial Minister Jihad
Azour was unable to prepare for the October 9 cabinet meeting
the request for a second tranche of funding for the TRA.
Shehadi requires a second tranche of $3 million out of the
approved $13.5 million annual budget, approved by the cabinet

BEIRUT 00001582 002 OF 002


previously. This amount will keep the as-yet small TRA
solvent for the balance of 2007. Shehadi fervently hopes
that this item will be on the agenda of the next cabinet
meeting, since the time for a required second vote fifteen
days later will be limited.
FELTMAN