LEBANON: TELECOM PRIVATIZATON LABOR WOES MAY

C O N F I D E N T I A L SECTION 01 OF 02 BEIRUT 001703 SIPDIS SIPDIS NSC FOR ABRAMS/SINGH/GAVITO/YERGER/DEMOPULOS, STATE FOR NEA/ELA, NEA/FO:KHARRINGTON, MPOPAL, E.O. 12958: DECL: 10/30/2017 TAGS: ENIV PGOV PREL PTER LE SUBJECT: LEBANON: TELECOM PRIVATIZATON LABOR WOES MAY AFFECT OTHER PRIVATIZATIONS REF: BEIRUT 1546 Classified By: DCM William Grant for reasons 1.4 (b) and (d) SUMMARY -------------- ¶1. (C) Two well-placed telecom officials say the progress of the sale of the two initial mobile licenses is going well. Both view privatization of the fixed line company, Ogero, with dissatisfaction, due in large part to their negative feelings regarding the Ministry of Telecommunications's Director General. Labor issues arising in the telecom sector privatizations may cause problems for the GOL in other sectors in the future. End Summary. ¶2. (C) On October 24, 2007, Econoff and Econstaff met with Ziad Hayek, Chairman of the Higher Council for Privatization, and Gilbert Najjar, Chairman of the Owner Operator Board of the Ministry of Telecommunications, to evaluate the progress of the privatization of the mobile telecom sector, as well as the fixed line company. STATUS OF THE SALE OF THE MOBILE LICENSES -------------- ¶3. (C) Hayek confirmed that he and the Telecommunications Regulatory Authority (TRA) are very satisfied with the progress of the program to sell the two mobile licenses, describing it as "very professional," with no political interference. Potential buyers from the region and from Europe have indicated interest, as well as some U.S. investment funds, which would need to partner with operators. At the last meeting on October 27 the cabinet approved for the second and final time the sale of the licenses, and there will be a press conference to announce the launch on Friday, November 2, 2007. "SELLING" THE SALE -------------- ¶4. (C) Hayek said there is not universal approval for the idea of privatizing the telecom sector, and he is working to overcome any opposition. He has been on TV and in the newspapers, giving interviews with any media outlet that wants to talk about the issue, although he says many of the major political players are "tired" of talking about it. Hayek has a real interest in meeting and talking to the more difficult opponents, but despite his requests, he has been unable so far to get appointments with Hizballah, the Amal political party or other leading groups respresenting the Shia population. (Note: We discussed this issue with Yassine Jaber, who represents the Amal viewpoint. Septel) After asking for funding for a public relations campaign for almost a year, he received approval six weeks ago, but he is not yet satisfied with the progress of the campaign. MORE DOUBT ON FIXED LINE PRIVATIZATION -------------- ¶5. (C) Both Hayek and Najjar maintained a thin-lipped near-silence when asked to discuss any progress in the transformation of the fixed line GOL company, Ogero, to the potentially private Liban Telecom. Najjar would only say that this is between Telecom Minister Marwan Hamadeh and the Director General Abdul Meunim Youssef, and Najjar is completely uninformed. Hayek was a bit more forthcoming, and pointed out that what appears to be an accident of interpretation by a consultant's report allowed Ogero to escape from the authority of the HCP. He confirmed that the cabinet had recently extended the term of the Ogero board (reftel),but only for three months, and only after a very heated discussion. Hayek said that DG Youssef has close relations with both Hamadeh and Prime Minister Fouad Siniora , but is "completely incompetent." He hinted at the potential for ongoing corruption in the new company, linking it to the Chinese "donation" of GSM equipment. He also confirmed Ogero usurpation of bandwidth, which we heard about previously (reftel). LABOR ISSUES -------------- BEIRUT 00001703 002 OF 002 ¶6. (C) Najjar summarized the current issues with employees of the two GOL-owned, privately managed mobile telephone companies, Alpha and MTC. He said that he believes that the GOL is using the labor problem to mask greater problems in the sector, such as the Hizballah telephone network. The 800 employees of the two companies are threatening to strike over the issues of continuation of service and indemnity resulting from the sale of the two companies proposed to take place in February 2008. Minister of Telecommunications Marwan Hamadeh asked the cabinet for a commitment to thirty months of employment for all employees after the sale of the two companies. After what were reportedly heated discussions, the cabinet agreed to only 18 months. Najjar believes that both the discussion and the final agreement were mistakes. MOBILE EMPLOYEES GREEDY? -------------- ¶7. (C) The GOL set what could become a precedent when it took over the two previous private mobile companies, by offering both continuation of service and financial indemnities to employees, paying out about $20 million per company. About 185 employees out of 400 in each company benefited from this previously. Those employees have apparently persuaded the newer employees that they can negotiate the same arrangement now. The court has ruled that this cannot be a class action suit, since these are two different classes of plaintiffs, but the discussions continue. Najjar believes that Hamadeh does not intend to offer more than the 18 months, but has asked Najjar to "drag out" discussions with the employee syndicate, possibly to obscure other questionable practices (NFI). The employees have upped their demand, now asking for 48 months of guaranteed employment and 30 months salary if they quit after the sale. POLITICAL RAMIFICATIONS -------------- ¶8. (C) One question is the impact any agreement to protect employees of this type might have on other efforts to privatize, such as the electricity sector. However, the head of the employee syndicate is from the Lebanese Forces party, part of the government March 14 coaltion, and Najjar believes that this gesture was a political decision, made with full knowledge that there could be major problems in the future. (Note: In a meeting on November 27, 2007, the cabinet discussed the extension of the management of the two mobile companies. It was immediately reported in the media that the cabinet had extended the contracts of the two mobile companies by six months, after their current terms expire in June 2008. Even Minister of Information Aridi reported that on television. In fact, after review of the minutes of the meeting, the exact decision was to assign to the Prime Minister, the Minister of Telecommunications, and the Minister of Finance the authority to negotiate the extension of the management contracts as necessary, based on the privatization process. End note.) GOL-owned, privately managed mobile telephone companies, Alpha and MTC FELTMAN