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