LEBANON: A SHIA CRITIC OF TELECOM PRIVATIZATION

C O N F I D E N T I A L BEIRUT 001717

SIPDIS

SIPDIS

NSC FOR ABRAMS/SINGH/GAVITO/YERGER/DEMOPULOS, STATE FOR
NEA/ELA, NEA/FO:KHARRINGTON, MPOPAL,

E.O. 12958: DECL: 11/01/2017
TAGS: ENIV PGOV PREL PTER LE
SUBJECT: LEBANON: A SHIA CRITIC OF TELECOM PRIVATIZATION

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

SUMMARY
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1. (C) Yassin Jabir, a Shia MP close to Speaker Berri, raised
concerns about privatization of Lebanon's mobile telecom
businesses, saying he is not opposed to privatization, only
the GOL methodology. He advocates for a slower process, with
more government control, to promote three objectives:
legality, timing and full value. According to Jabir, the GOL
is not properly informing the parliament of the process or
inviting dialogue with key government entities. End summary.


2. (C) Econoff and Econstaff approached Shia MP Yassin Jabir
to find out about rumored Shia opposition to privatization,
especially within the telecom sector. Jabir, a close ally
and major financial supporter of parliamentary Speaker Nabih
Berri, a Shia leader, although not a member of Berri's Amal
party, is considered a barometer of Shia opinions. He worked
on the privatization law and has a strong pro-business focus
and so it was not surprising to hear Jabir say that he
considers his position to be "pro-privatization." He has
strong opinions, which he shared with us.


3. (C) According to Jabir, the problem is not privatization,
but transparency. In his opinion, Lebanon cannot afford to
make a mistake in this area, and staging the process over
time would allow the GOL to retain necessary control. Jabir
goes back in time to the creation of the two original mobile
telephone companies, pointing out that the absence of a
regulatory body opened up the process to criticism. Now, the
Telecommunications Regulatory Authority (TRA) is just
starting, and the legitimacy of the TRA itself is not clear.
Jabir argues for three objectives: legality, timing and full
value.

LEGALITY OF PROCESS
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4. (C) According to Jabir, the correct legal process to
privatize the two mobile telecom companies would be to first
complete the corporatization of the two existing mobile
telecom entities now managed by Alpha and MTC. This should
proceed exactly as per the corporatization of Ogero, the
fixed-line company. Jabir believes that this alone requires
a new law. He also believes that the TRA only has the
authority to sell two mobile licenses, but the sale as
proposed includes much more than licenses; the two companies
include fixed assets, and more important, a large and
valuable client base. Jabir believes that the TRA does not
have the authority to sell those, and that lack of legitimacy
will deter potential buyers, and reduce the value of the sale.

TIMING
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5. (C) Jabir thinks that the GOL is "in a hurry" to sell, and
so is not going to get full value for the sale of the two
licenses. He questions the source of the financial
evaluation of the two companies, and asks if there is a
reserve price. Jabir says that this information is not
public, and even the parliamentary committees does not have
access to that.

FULL VALUE
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6. (C) In defining "full value," Jabir clearly has more in
mind than a high selling price to reduce the government
deficit. He wants better service for businesses and people,
which he believes will only come with competition. He
stressed the value of the equity in both companies, which
includes both assets and good will, and will only be valued
in a fully-transparent sale. He does not believe that the
GOL has defined a financial objective for the sale. He
stressed that there has been no dialogue with the GOL, the
TRA, or the Higher Council for Privatization -- "Nothing," he
said.
FELTMAN