LEBANON: FIGHT FOR CONTROL OF LBCI TELEVISION

C O N F I D E N T I A L SECTION 01 OF 03 BEIRUT 000859

SIPDIS

SIPDIS

NSC FOR ABRAMS/SINGH/MARCHESE/HARDING

E.O. 12958: DECL: 06/13/2027
TAGS: KPAO PREL PGOV LE SA
SUBJECT: LEBANON: FIGHT FOR CONTROL OF LBCI TELEVISION
HEATS UP

REF: BEIRUT 837

Classified By: Jeffrey Feltman, Ambassador, per 1.4 (b) and (d).

SUMMARY AND COMMENT
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1. (C) Twice in recent weeks, most recently during a
meeting with the Ambassador and Pol/Econ chief on political
matters (reftel),Lebanese Forces leader Samir Geagea has
sounded alarm bells about control of the Lebanese
Broadcasting Corporation International television network
(LBCI) passing into potentially hostile hands. Geagea claims
that LBCI Chairman Pierre Daher, once subservient to Geagea
but who gained control of LBCI upon Geagea's 1992 prison
sentence, is about to conclude a deal by which Saudi Prince
Walid bin Talal will increase his share from 49 to 85 percent
of LBCI's satellite network, by buying shares nominally in
Daher's name but which by rights -- Geagea claims -- belong
to the Lebanese Forces (LF). By virtue of having control of
the satellite network, Prince Walid will then control the
terrestrial channel that serves Lebanon, as the latter
depends on the profits made via satellite. With Prince Walid
(half Lebanese through his aristocratic mother, daughter of
Lebanon's first prime minister) sympathetic to the pro-Syrian
March 8 forces and hoping to replace Saad Hariri as the Sunni
leader of Lebanon, Geagea finds the potential loss of a
mostly independent and mildly pro-March 14 television network
to be alarming. He does not believe that, whatever his
commercial interests, Prince Walid will forgo the opportunity
to inject anti-March 14 bias into the terrestrial broadcasts.
Also hoping to regain a LF revenue stream, Geagea plans to
challenge the legal ownership of LBCI in court. But, given
how slowly the ownership battle will move through the court
system, Geagea hopes that we can intervene with the Saudis to
discourage Prince Walid's bid. Having seen the media
coverage of Prince Walid's cavorting with all of the motley
pro-Syrians in Lebanon, we, too, fear the political
implications of LBCI landing under his control. But we do
not know how much influence we might have in blocking what
Prince Walid will surely claim is strictly a private
commercial deal. End summary and comment.

A TALE OF TWO (EX) FRIENDS
AND A PROFITABLE FRANCHISE
--------------


2. (C) Lebanon's first independent television station, LBC
(later LBCI) was established by Geagea's Lebanese Forces in
the 1980s. Pierre Daher, now LBCI's Chairman and principle
stockholder (counting the shares held by Daher's relatives),
was a follower of Geagea and quickly showed media savvy in
building up the station. Both Daher and Geagea tell us the
same story of LBCI's development and background to the
current ownership dispute: When Geagea was sentenced to jail
in 1992 and the Lebanese Forces faced state confiscation of
all assets, Geagea quickly transferred nominal LF ownership
of LBC to Daher and his relatives. While Geagea languished
in prison, Daher expanded the capital through new share
offerings, adding the satellite network in 1996 and gaining
new Gulf audiences through lively entertainment.


3. (C) By the time Geagea was given parliamentary amnesty
in 2005, the shares held by Daher and his relatives -- shares
that Geagea believe rightfully belong to the Lebanese Forces
-- in LBCI's profitable satellite network, based in the
British Virgin Island, were diluted to about 35 percent of
the total. Former Prime Minister Issam Fares has an
additional 15 percent, Prince Walid owns 49 percent, with
small numbers of shares held by a few others. While Daher
and his family maintain majority ownership in the terrestrial
network that accounts for 70 percent of Lebanon's television
viewership, the money-losing terrestrial network depends on
subsidies from the satellite company to survive.


4. (C) A lively ownership dispute has raged ever since
Geagea's release from prison. Daher maintains that the asset
he took over from the LF was virtually worthless and has no
legal connection to the LF today. Geagea, conceding that
Daher has created wealth for the company, has proposed that a
reputable international auditing firm determine what
percentage of Daher's shares should remain with Daher, based
on his performance leading the company, and what percentage
should revert to LF. Daher rejected the idea. Geagea has

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rebuffed Daher's attempt for a financial settlement,
explaining that, for the LF, having political influence
inside the company (which is still largely -- but not
exclusively -- staffed by a high percentage of LF
sympathizers) is as important as the money. Daher this week
has taken out prominent advertisements in Lebanese newspapers
claiming that LBCI has no connection whatsoever to the
Lebanese Forces.

DAHER TO SELL TO PRINCE WALID
--------------


5. (C) Now, Geagea, citing sources inside LBCI, claims that
Daher is on the verge of selling more than half of the shares
he controls to Prince Walid for about USD 33 million, a price
that Geagea complains is far below the actual value of the
shares. Geagea said that he was temporarily able to derail
the deal by threatening legal action, but now Prince Walid
and Daher have made new arrangements. (If the asset is truly
as undervalued as Geagea claims, perhaps Prince Walid has
persuaded Daher to give him a reduced price to compensate for
the risks of the ownership dispute. Geagea's advisor Elie
Khoury argues that the allegedly low price stems from some
under the table deal by which Daher still maintains more
control than would nominally appear to be the case by
percentage shares alone. Khoury speculates that Daher has
transferred the ownership dispute issue he has with Geagea to
the international realm by bringing in Prince Walid, making
it that much more difficult for the LF to pursue its case.)


6. (C) Geagea told us that he is preparing a court case
that should be ready for action in a few months. He is
counting on the fact that everyone in Lebanon knows the
history of LBCI and how Daher got his shares. But, in the
meantime, Prince Walid might conclude his deal with Daher.
As the complicated court case might drag on for years, the
damage will be done: Prince Walid will have control of the
content of LBCI's satellite and terrestrial networks. The
Ambassador, noting that Prince Walid is a businessman with
media interests (including Rotana television),asked whether
this isn't simply a business deal, with Prince Walid wanting
more of what is a successful franchise in the Gulf. Geagea
was convinced that, whatever the commercial interests, Prince
Walid was eager to use LBCI's Lebanese broadcasts to advance
his political agenda. Everyone knows that Prince Walid wants
to be Lebanon's Prime Minister, Geagea noted. Geagea asked
that we use whatever influence we have with the Saudis to get
them to apply pressure on Prince Walid to drop his attempt to
buy LBCI.

COMMENT
--------------


7. (C) LBCI has more than 70 percent of the Lebanese
television viewership, so it would be a powerful tool to
advance a political agenda. Pierre Daher, who has indeed
proven to be a talented and creative media leader, has
steered the station carefully, balancing the traditionally
pro-LF staff with some strong Aounist sympathizers (including
News Director George Ghanem) and anti-March 14 programming
(such as a popular March 14-bashing comedy show). In
general, while it definitely displays a politically Christian
flavor, LBCI has been slightly pro-March 14 but far more
independent and credible than Lebanon's other stations that
are associated closely with personalities or movements.
March 14 has been more often helped than hurt by LBCI's
current terrestrial broadcasting.


8. (C) We find Geagea's fears credible that a majority
share ownership of the satellite station in Prince Walid's
hands will change the tenor of the domestic, terrestrial
broadcasting. Prince Walid made a pitch to become Prime
Minister back in spring 2005, after the fall of the Omar
Karami government but before the Syrian troop withdrawal.
Popular revulsion against his close association with the
pro-Syrian figures seen to have been implicated in the murder
of Rafiq Hariri led to Najib Mikati getting the nod to form a
cabinet instead. When Prince Walid was most recently in town
last month upon the death of his aunt Alia Solh (like his
mother, one of the fabled Solh sisters, the daughters of
Lebanon's first prime minister, Rashid al-Solh),he spent his
time with the aggressively pro-Syrian March 8 politicians
like Talal Arslan and Omar Karami. Not knowing Prince Walid,
we don't know whether he is really as pro-Syrian as his

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reputation. But we can say with confidence that, with Solh
blood running in his veins, he is anti-Hariri: the Solhs
still bristle at the thought that a parvenu like Rafiq Hariri
could displace Lebanon's Sunni aristocracy. That makes
Prince Walid anti-March 14, and that makes his potential
ownership of LBCI worrying. But, frankly, we do not know
what the USG can do to prevent what he would no doubt claim
is purely a commercial deal. End comment.
FELTMAN