BEIRUT: Lebanon is ready to auction off its two state-owned mobile telephone companies after six years of delay to lower debt that equals almost twice annual economic output, Finance Minister Mohamed Chatah said.
Qatar Telecom, Saudi Telecom Co, Emirates Telecom Corp, Zain (formerly known as Mobile Telecommunications), Bahrain Telecom Co, Orascom Telecom Holding, have all expressed an interest, Chatah said.
The sales of MTC Touch and Alfa, originally proposed in 2002, would represent the first auction of state assets since the end of the 1975-1990 civil war and were repeatedly put off because of bickering between the postwar ruling factions.
“We want to make up for lost time,” Chatah, said in an interview on Friday at his office in Beirut. “I think it is in everyone’s interest. The plan is there for the end of 2008 or first quarter of 2009.”
The sales may raise as much as $7bn, which will be used to retire some of the $44.5bn that Lebanon mostly borrowed to help rebuild infrastructure devastated when Muslim, Christian and Druze militias battled for supremacy and later during a 2006 conflict between Israel and the Shia Hezbollah movement that left parts of Beirut in ruins.
Revenue from the phone companies “could improve Lebanon’s debt dynamics significantly,” said Nassib Ghobril, head of research at Lebanon’s Byblos Bank. “If this sale took place as well other structural reforms at the start of 2003 we wouldn’t be talking today about a level of public debt that is equivalent to about 180% of gross domestic product.”
To cut debt and boost economic growth the government is also looking to sell Casino du Liban and national carrier Middle East Airlines.
Donors who in January 2007 pledged $7.6bn to help Lebanon lower debt and finance reconstruction urged the country to sell state assets and increase taxes.
Politics “could prevent the implementation” of those plans, said Laura James, an economist at the Economist Intelligence Unit.
The telephone company sales were first expected to take place in 2002 and were delayed by factional bickering. Political disagreements also led to 18-months of government paralysis, which was resolved in May when Hezbollah and its allies agreed with the coalition of Prime Minister Fouad Siniora to elect former army commander Michel Suleiman as president and form a unity government.
“This is a government in which everyone will pay a political price if bad things are allowed to happen or good things are prevented from happening,” Chatah said when asked whether the new government would be able to carry out its promise to sell the companies. “This is not a partisan government, not a political party that is in charge with an opposition trying to make the government look bad.”
Chatah said he expects the economy to grow 5% this year, as compared with 4% in 2007.
Lebanon’s credit rating was increased on August 5 by one level to B-, six steps below investment grade, from CCC+ by Standard & Poor’s, which said the political agreement led the country to step back from the “brink of civil conflict.” Moody’s rates Lebanon’s long-term foreign currency debt as B3, six levels below investment grade.
Lebanon has about 1mn mobile-phone users who generate more than $750mn annually in net revenue for the government, according to the Beirut-based Daily Star.
About three out of every 10 Lebanese has a mobile phone, compared with 75% in Jordan, according to Jawad Abassi, founder and general manager of Arab Advisors Group, a telecommunications research company. – Bloomberg