Executive talks to Mohamed Shabib, general manager of MTC Touch, one of the two cellular phone management companies, on the state and development of Lebanon’s mobile telecom sector.
E Following a year of challenges, do you see the Lebanese telecommunications industry as being in a better or worse position today than 12 months ago?
We are definitely very hopeful that changes are underway. In 2005, we didn’t have the opportunity to realize everything we wanted to do with the government. However, for next year we hope things will change for the better in terms of new services, network enhancement, expansions and the development of current services.
E Given the turbulent events of 2005, how difficult was it for you to maintain your planned trajectory for the year?
As you know this network is owned by the government so any expenditure needs to be approved by the government. Due to the events of 2005 – which we understand were beyond anyone’s control – and the changes in the Lebanese political arena, which shifted the telecom sector down a notch in terms of priorities, our getting the approval for our 2005 program was affected. Now there is a new government and talk of privatization, we are working with the government to see this process go through.
E Do you consider prospects for the final installation of the Telecommunications Regulatory Authority realistic in the short term, and what will the agency’s commencement of operations mean for the activities of MTC?
It has to be realistic. If the government wants to privatize they need to regulate and without a regulator it’s not going to work. They need to put a regulatory framework in place because privatization means competition and without regulation there will be no competition; there will be a war. So we have to go the way of other countries and have a proper regulatory body.
E And how will that affect MTC?
Well, we are looking forward to being part of privatization, to own the private services and offer the best we can to the market once we have a free hand, within the regulatory framework that the government will install.
E When you hear that the ministry of telecommunications (MoT) approved paying compensation to France Telecom, do you think that the country has fully overcome what Marwan Hamadeh has described as a debacle of the days when Lebanon’s governments were under Syrian tutelage?
We were not part of that period, so I would rather not comment on this. It could happen anywhere. Today, we believe that the government is serious about privatization. It won’t take place overnight, but if the process begins in 2006, we will be very happy.
E Were lapses such as the announcement and then recall of the switch away from ‘03’ numbers this autumn signs of structural problems in telecom decision making in Lebanon?
The new numbering plan was put in place to help expand the market from its initial bloc of 1 million ‘03’ numbers for both operators. There had to be a way to expand on this and the government proposed this scheme. Technically it is very simple but we wanted to give businesses time to adjust and tell other networks of our changes. However, during the build-up and preparation when we had the marketing campaign for the public, there was a political decision to postpone the process due to a belief that the switch might affect the previous records and in turn affect the investigation into the assassination of [ex-premier Rafik] Hariri.
E It was just bad luck then?
Not bad luck, just a decision. In my opinion if we had gone ahead with the number migration it would have not affected any records. As a technical person I can say this. The records are there and can always be cross-referenced with the new numbers. However I think the government wanted to be more conservative and delay the process.
E Did the abandoning of the switch result in financial damages for MTC?
The loss was in the preparation efforts and there was a certain loss of capital, but as you know, any capital comes from the government’s pocket not ours. But it’s not going to go to waste because we are simply on hold. Sooner or later they will have to switch.
E When MTC stepped into the management role at Mobile Intermediary Companies MIC2, or today MTC Touch, group general manger Saad Barrak told Executive that he would have preferred a direct role as a licensed operator over being a management company. Given that the past 18 months were not always smooth sailing for mobile networks, seen in technical problems at various points, are you in hindsight happier to have been “only the manager” over that period?
Our ambition in the Lebanese market is still to be an operator. At the time we were offered the management contract we were happy. We felt it was a way to prove ourselves. Had we been an operator or license owners from the start, the events of 2005 would not have altered our ambitions for the Lebanese market.
E So MTC still harbors strong ambitions to become a full-scale operator in Lebanon and acquire the necessary licenses?
Absolutely, Lebanon is very important to us.
E What value would you put on those licenses today?
I can’t share that information with you. There are a lot of factors involved. There is due diligence required and I am sure the government is doing its part in assessing the value.
E Higher than in 2000, when the government had an offer of $1.2 billion?
I really can’t comment.
E Does MTC have ambitions in the internet market?
If the license would be available to us, we will think about it. We do have a wide spectrum of services in Bahrain, where we have an ISP service, we have an international service license, we have an international facilities license and a value added service license. We have seven or eight licenses that are operational. To have the same in Lebanon would be great but let’s concentrate on the mobile business licenses.
E Does MTC have ambitions for rolling out 3G or UMTS [Universal Mobile Telecom Services] in Lebanon or other countries?
Absolutely. We have started with 3G in Bahrain and in Kuwait and Jordan we are gradually going in that direction. We are starting with Edge in Kuwait and Jordan and Iraq as well.
E When will it happen in Lebanon?
It is up to the government. With 3G, you are talking about a different band of the spectrum, frequency-wise. If that frequency is available to be licensed, then the government will have to take the necessary steps to offer it.
E How big a role in the MTC picture does the Lebanese operation currently play?
Like I said, we are managers, but as an operator it would be very important to us. We are in Kuwait and Jordan and Bahrain and there is a lot of traffic between Lebanon and those countries and we can provide a good service at attractive rates.
E If you were successful in gaining an operator license, how soon could you change the pricing structure, and what per-minute rates for pre- and post-paid would you want to offer?
Each market needs to be studied before you decide on rates. We agree they need to be reduced. By how much depends on how quickly you can roll out the new equipment that can cater for anticipated extra demand at lower rates. For example, let us say your half a million subscribers would talk an average of 100 minutes per month each at the present rate. If you reduced the rates by half, your expectations will be that these people will increase their usage to 180 or even 220 minutes. This extra demand would require additional capacity on the network and it won’t happen over night, so if we take the license today, we will have to study what we will need to cater to the extra demand, which might take six months to a year and we would gradually reduce the rates to a reasonable level comparable to the rest of the region. Jordan charges a fraction of what is charged in Lebanon.
E Orascom Telecom Holdings (OTH) recently announced a 125% increase in subscriber numbers in a year-on-year comparison between September 30, 2005, and September 30, 2005. OTH also achieved a 75% improvement of net profits in the first three quarters of 2005. The OTH subscriber numbers grew strongly in markets such as Pakistan, Algeria and Iraq. How do you assess the potential of Middle East telecom markets for further growth in 2006; which markets does MTC see as the most promising; and do you regard OTH as your main competitor in the Middle East?
We are competing with every operator in the region. Orascom and MTC are not in any one country together except Iraq. They have IRAQNA and we have MTC Atheer. At this level in Iraq we are not really competing. We are just trying to provide a service because the market is still available to everyone, so whoever satisfies the market first will start the real competition. Egypt still has potential. The penetration rate for the two operators is only 10%. Saudi Arabia is another. They are looking for a third operator. But Egypt is probably the most promising market.
E As the managing entity on behalf of the MoT, you have a fixed income from providing your services. That presumably reduces your worries over government decisions affecting telecoms in Lebanon. It certainly curbs your ability to set prices and policies. After 18 months of experience, does this situation also affect your motivation or slow your ability for growing MTC Touch subscriber numbers and introducing or improving services?
Like I said, we are dependent on the government. It is frustrating but as a manager our job is to make sure the service is running properly and we have certain service thresholds that we want to maintain.
E That is fair enough, but how has your relationship been with the public who by and large probably don’t understand your mission and expected you to ride into town on a white horse and improve the service and make it cheaper?
Initially people looked to us to reduce the rates but between then and now they know we don’t have this control. All rate changes and additional services have to come from the government.
E How strong do you assess your chances in acquiring the license for the network when it comes to a bidding war? Are you afraid of political interference in a bidding scenario?
I am confident that the government will handle the bidding in a professional manner and give it to whoever can give the best offer. Regardless of what happens in [the privatization process of] 2006, we have a contract that we intend to respect and do our part until it expires in 2008. If nothing else happens, at least we have that.
E Did the World Summit on Information Societies (WSIS) in Tunisia last week change anything in setting guidelines and working parameters for operators such as MTC or the ICT industry at large?
As deputy chairman of the ITU Arab regional working party on private sector issues, I’m pleased with the outcome of the Tunisia WSIS, which addressed crucial issues such as the exchange of information on internet governance, financing issues for developing countries and the creation of a Digital Solidarity Fund. I believe the benefits from the Tunisia WSIS are very valuable in bridging the information gap between developing and developed countries.
E MTC Touch is heavily involved in corporate social responsibility activities. How and why is this important to the company?
Ever since MTC was awarded the management contract in June 2004, we have participated in a variety of events ranging from industry-related activities to social and cultural ones. To support the telecom industry in Lebanon, we sponsored Saitech, the Sidon Exhibition for Information Technology, back in August and we are also participating in Termium 2005, the main information and communication technology exhibition in Lebanon, which we consider to be an ideal environment for the brand. Our projects for 2006, include the sponsoring of the World Bank’s “2006 Mediterranean Development Forum.” But MTC Touch is also keen on expanding outside the corporate arena. Our commitment to the community we live in is a key component of our mission statement and an integral part of our company’s development.