The operators of the currently government-controlled Lebanese mobile phone networks are officially called MIC 1 and MIC 2, for Mobile Interim Company. MIC 2 is the Mobile Telecommunications Company (MTC) Group, the rapidly growing Kuwait-based Arab telecommunications firm with operations across the Middle East. EXECUTIVE talked to MTC general manager, Saad Al Barrak, on their management of the Libancell network and on how long MTC would like to play an “interim” role.
At this early stage, how are things going with the management of the Libancell network?
Everything is going all right. We have significant achievements and although we have just started, we have the operation totally under control, with increases in subscribers, revenue, everything – which is extremely encouraging.
How many employees do you have at this point?
Today, we have 305 and I think this is the level we are going to stay at. That is more than enough to handle the entire operation.
How many new people did you have to hire?
[Of previous staff] 140 stayed and we hired 160. This is a massive change and not easy. Doing it quickly and letting people pass through orientation and training and at the same time operate as normal and even better, with improvements on productivity, was a good achievement.
Were there any glitches in the takeover phase?
Yes, the glitch was mainly on the prepaid service. It is an old technology that is susceptible to attacks. We had two major virus attacks that brought the network down and caused us some problems, including interruption of service. However, this is a heritage of the past that we have to deal with. We have already made an agreement with the government to change to a newer technology platform.
And the government will finance this?
Definitely, the government finances all the capital expenditure. This is well under way and we hope that things will soon be much more robust and reliable. In the meantime we are enhancing and protecting the current installation, in order to overcome the period until the new technology is in place.
Are you foreseeing changes in the service portfolio, dropping or adding specific services?
We have to revamp a lot of the products. This is also subject to the government’s approval, especially with new packaging and pricing. We have many ideas in that regard, which should promote the overall wellbeing of the network and the services.
How is your relationship with the government at this point?
It is excellent. I think the ministry of telecommunications, presented by the minister and his assistants are all extremely helpful and fully understanding.
Is it correct that you will not only make changes in technology and services but also in identity and marketing?
Right. Libancell belongs to the old company. We can use it only to a maximum of six months. During this time, we are agreeing on a new name and a new brand with the government. They have to endorse it because they own the company.
Did you already present a proposal?
We have been engaged in presentations and discussions for the last month, and we are arriving at the conclusion of this stage.
But the operating company will be MTC?
It will be MTC Liban. It is a separate company and a subsidiary of MTC, registered as a Lebanese company.
Does it have any Lebanese shareholders?
No, not at all. It is 100% owned by MTC.
And management of the company and network will be handled from Beirut?
Totally from Beirut, yes. We sent a management team here, which is in place. They are operating as an independent team here and supported by the group.
Will there be any synergies from your presence in other countries across the region?
Yes, of course, that’s the beauty of contracting with a group and not an individual company. All the goodies of the group will be earned at a very low cost here.
Can you give examples for synergies?
They exist in terms of promotion, branding, training, availability of resources, funding, product development, technology development, also collective bargaining with suppliers, which will give the government much better prices for their cap[ital] ex[penditure] investment.
MTC entered management bids for both networks and was the second to achieve a contract. Did you get an equivalent deal by being awarded management of the Libancell network?
I don’t think that there is better or worse in this case. These are two companies that have been operating at similar size. Cellis definitely had better technology. We knew this and that’s why our price to manage Cellis was higher than our price to manage Libancell. Libancell’s technologies are also closer to our technologies. Our knowledge and expertise in Libancell was greater than in Cellis; that was the main differentiator.
Are you having plans for the presence of MTC in the Lebanese market beyond the management function at the network?
Our plan is wherever we go to own equity as well as manage. We will definitely be working on an ownership plan, along with everybody else who will present proposals to the government. We hope to be more convincing than others, with more benefits, and that’s the challenge to us.
Would you see a step into ownership already possible during the management period or only afterwards?
There is a clear decision and strategic direction of the Lebanese government on privatization of the telecoms sector. The management contract has been widely publicized and taken as an interim period until we arrive at full privatization. So everybody agrees that there must be full privatization. The speed and the approach are where the differences are. Once these things are resolved, it is definitely better to transform the stake of the state. There is much more advantage to it in selling its stake. I think they will take that step sooner rather than later.
Your bid for the management contract was substantially below what the government paid previously and also below expectations. What gave you the confidence to be able to make a profit at this level?
Number one, we are a highly experienced company. We have the economy of scales, so our cost structure will be lower than others who would only handle Libancell on its own. These are two major factors. We have been very aggressive. The Arab world market is the prime market for the MTC Group. We want to be recognized by countries that we can come, manage their strategic assets in telecommunications business and do very well so that will extend the goodwill and, hopefully, move to the full privatization stage. This was our objective and we are extremely happy about developments so far and don’t regret it.
To what degree of market penetration do you foresee growth of the mobile market in Lebanon?
I think Lebanon should have a minimum of 40% penetration in three to four years time, given the liberalization of the market that we are free to expand as much as we can.
This means you first need a numbering plan?
Definitely. A numbering plan is being discussed now and will be amended hopefully by the end of the year, which will give everybody a big range of numbers. Lebanon has already passed the telecommunications law, which is a very good and advanced law. They need to enact this law by setting up an independent regulator, the Telecommunications Regulatory Authority. That should be very helpful in instigating development and furthering the growth of the telecommunications industry in Lebanon.
You would not disagree if I say that telecommunications is too expensive now?
It is very expensive in Lebanon and we hope to contribute to making it much more cost effective with a lot more variety and much better service for the client.
But at this point you cannot give a target number for per minute rates and such?
I cannot. If I fully owned Libancell, I would give you a plan with dates and commitments and numbers, but since the decision is lying with the state and we know the complications of the political side of the story, then definitely I cannot make any comments.
People in the industry claim that authorities were already twice close to signing the enactment laws but didn’t because of political personality problems. Would that deter you in any way?
I think it is deterring the whole country. We hope that with the new elections on presidential and parliamentary levels within a year from this time, things will be much better, like all the Lebanese hope for a much better political environment, not to hinder the development of the country.
But are you confident that in any case, Lebanon will remain stable?
That, I have no doubt about. Lebanon is volatile and highly moving, but it is stable.