LIBERIA STUMBLES IN EFFORT TO PASS TELECOMMUNICATIONS

UNCLAS SECTION 01 OF 02 MONROVIA 000496

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TAGS: ECPS ECON PGOV ETRD EINV LI
SUBJECT: LIBERIA STUMBLES IN EFFORT TO PASS TELECOMMUNICATIONS
REGULATION


1. (SBU) SUMMARY: There are indications that comprehensive but
flawed legislation to regulate Liberia's telecommunications market
is close to a final vote. The late inclusion of a few, but
significant, anti-competitive measures raises concern that the Act
may have an immediate impact on current GSM mobile operators and
could undermine the largely open market conditions that were
responsible for the rapid expansion of telecom services and lower
prices in recent years. World Bank advisors are unhappy with the
amendments but remain supportive overall of the Act that seeks to
provide a more comprehensive definition of the sector and more
authority for the relatively new regulator, the Liberia
Telecommunications Authority (LTA). The Bank and private operators
have encouraged the GOL to allow public hearings before any final
vote. Post supports this call for an open and transparent
consultative process. END SUMMARY.


2. (U) In August, 2006, the Liberian Senate confirmed the Chairman
and Board of Commissioners of the Liberia Telecommunications
Authority (LTA),newly established following the passage of an Act
by the National Transitional Legislative Assembly (NTLA). The LTA
oversees the scope and operations of the country's
telecommunications industry, a role previously played by the
Ministry of Posts and Telecommunication (MPT).


3. (U) The LTA faced two urgent priorities: 1) to renegotiate the
licenses previously awarded to each of Liberia's four GSM mobile
network operators; and 2) with support from the World Bank, to help
elaborate a comprehensive and permanent National Telecommunications
Law.


4. (U) In January 2007, LTA thought it had completed its first
mandate. After several months of negotiation, LTA was finally able
to draft a licensing agreement calling for the four GSM operators to
pay an annual license renewal fee of $300,000 and to have the life
of the individual licenses extended for 18 years. The four operators
who received the licenses were:

-- LoneStar Communications (http://www.lonestarcell.com/),which
launched a GSM network in 2001 and has gradually extended it outside
the capital. Majority-owned by South Africa's MTN.

-- Cellcom (http://www.cellcomgsm.com/),a new GSM operator that
appeared in 2004 and is U.S.-owned

-- Comium Liberia (http://www.comium.com.lr/),Lebanese-owned.

-- Atlantic Wireless Liberia, under the Libercell brand,
(http://www.libercell.info/),Lebanese-owned.



5. (SBU) Within days, however, the GOL asked the Ministry of Justice
to nullify the licenses signed by the LTA. The President reprimanded
the LTA, saying it had no authority to sign on behalf of the GOL. In
newspaper reports, the GOL suggested it wanted to make sure that the
LTA had acted "within the confines of the laws" when it entered into
the contracts with the GSM companies. According to World Bank (WB)
advisors, the Minister of Finance and others thought that the
agreement did not reflect the true value of the market and the
Ministry of Justice claimed that the incentives embedded within the
licenses required MOJ approval before issuance. The WB advisor
suggested the GOL sought not only to increase receipts from renewal
fees but also to re-examine the incentives that had been included in
the licenses. To date, the licenses have not been finalized and all
four operators are conducting business based on much older (and
cheaper) agreements. Moreover, the LTA remains uncertain of its
authority to grant licenses based on this initial experience.


7. (SBU) Meanwhile, a special draft review committee composed of
officials from MOF, LTA, MPT, the Liberia Telecommunication
Corporation (LTC) and World Bank advisors finalized a draft
Telecommunications Act that would repeal a handful of outdated Acts
and laws covering telecommunications and establish an interim
framework for telecom regulation. The committee handed its draft to
the GOL in November 2006. According to World Bank consultant, Jerome
Broche, the GOL made several changes to "what was previously a good
draft," and then transferred the draft to the legislature in
February. The President then asked the legislature to adopt the Act
during its emergency session that commenced April 23. However, the
legislature sent the Act back to committee for further
deliberations.


8. (U) The most significant change the GOL made to the draft Act was
the insertion of language that establishes the LTC as a "national
operator" with special privileges. The role and responsibility of
the "national operator" is poorly defined and could allow the LTC to
expand in a number of directions. LTC is the public company that has
a monopoly on the operation of the now essentially non-existent

MONROVIA 00000496 002 OF 002


fixed-line telephony network in Liberia. LTC is currently suffering
financial difficulties. LTC reportedly has a potential fixed
tele-density of only 0.21 per cent based on less than 7,000
installed land lines in the entire country. The central Monrovia
network was badly damaged during the civil war and rural telephone
networks were completely destroyed during the fighting.


9. (SBU) A WB source told EconOff that the World Bank thinks the
changes to the draft were "counterproductive and damaging to the
market." He called LTC "a hollow shell that doesn't exist" and said
the idea of beefing up a state-owned, national fixed-line carrier
was contrary to logic when Liberia's mobile telephony market was
already very efficient, characterized by low prices and improving
service. The WB advisor suspects the goal is to allow LTC to expand
into the mobile market, damaging the generally good market
conditions. Despite these criticisms, the Bank has decided that
overall the Act is a workable compromise and does not intend to push
the GOL over the LTC provisions. The Bank does, however, advocate a
transparent, consultative process that should include public
hearings before any final vote. The Bank would not insist on
appearing at the debate but would likely respond positively to an
invitation from the legislature to present its opinions on the Act.


10. (SBU) Current GSM mobile operators are not so sanguine.
U.S.-owned Cellcom President Yoram Cohen told EconOff on April 23
that the entire industry (including his prime competitor, Lonestar)
are concerned that the Act would force private operators to fund a
state-owned competitor. He pointed out that the draft Act was
written by a committee that included two officials from the current
LTC Board of Directors, Ben Wolo and Nathaniel Kevin, both of whom
allegedly inserted the new language benefiting the national
operator.


11. (U) Cohen said an abrupt passage of the act in its current form
could stifle the open competition that has already expanded telecom
services and lowered prices. Cellcom is urging the legislature to
allow an open debate and to reconsider several key provisions of the
Act, most importantly the re-establishment of LTC, but also other
industry criticisms including a loophole that would authorize
mandatory routing of inbound international calls through a third
party national operator (presumably LTC),a provision to force
service providers to allow the GOL to intercept subscriber calls
without any liability protection for the operators, and the absence
of incentive arrangements that are an integral part of current
operating agreements.


12. (SBU) Comment: GOL's interest in sustaining LTC as a potential
operator (as opposed to regulator) could be linked to Chinese
proposals to build a national Information and Communications
Technology (ICT) network provided they (the Chinese) can run LTC for
the next 10-20 years. End comment.


13. (SBU) On April 26, it appeared that the legislature was moving
in the direction of a broader public airing of the bill. LTA
Commissioner Lamini Waritay told EconOff that the bill would likely
not come back for a vote until mid-May. Cellcom said it had been
assured by the legislative subcommittee that the law would not be
scheduled until after House Speaker, Alex Tyler, returns from the
U.S. May 5, and hearings would likely occur the second week of May.
Broche indicated World Bank telecom experts are expected to arrive
in country that same week.


14. (SBU) COMMENT: Telecommunications technology provides the
potential for Liberia to leapfrog over the traditional wireline and
monopolistic environments that were common throughout post
independence Africa, provided the GOL establishes the appropriate
forward-thinking, independent regulatory regime. The failure to back
the LTA with a permanent, independent and comprehensive national
telecommunications law has left LTA vulnerable. Unfortunately, the
current draft contains disturbing anti-competitive measures that do
not serve the interests of Liberia and may drive out the very
competitive firms responsible for increased service and lower
prices. World Bank expert advice on "best practices" has come up
against tendencies within some GOL quarters to "Liberianize" - in
this case to create what LTC Commissioners have described as an
"organic model suited to Liberia's unique conditions." There are
already a good number of private competitors in the mobile market
and it makes no sense to inject the distortion of a GOL-owned
competitor. We will seek to ensure that these issues are raised in
the appropriate public forum before any final vote on the Act is
taken. END COMMENT.

BOOTH