Managing director of Connexus Consulting
E Now that the Telecom Regulatory Authority (TRA) is being put on track with the search for a capable team, how long do you expect it to take until the agency can be fully operational and what should its first actions be?
Secondly, is it possible to draw a bottom-line comparison of how much the Lebanese state gained in revenue from taking control of the mobile networks and how much this decision cost the state, and what the net financial balance of the whole dealing was from the date of cancellation of the BOT contracts until 2005, when the original contracts would have expired?
I have full confidence that the Telecommunications Regulatory Authority will operate in early 2006, in a transparent and professional manner. The TRA will be very instrumental in formulating a clear strategy for the telecom sector if the government lets it perform its job freely without any limitations and assuming it is given the budget it needs to start implementing its goals. TRA’s first step would be to conduct a study of the telecom market and then prepare the licenses for the two mobile operators. Its second step would be the licensing of Liban Telecom which provides services to about half a million fixed line subscribers. The new telecom company will offer a 40% partnership to telecom operators while additional blocks of shares may be privatized through an initial public offering. The third step would entail providing licenses for operators to provide broadband connectivity, which is needed to boost the economy in general and the IT industry in particular. Last but not least, international rates must be lowered to align with international benchmarks and new service providers may be licensed to offer international connectivity for voice or data, with the former requiring the approval of the council of ministers. The TRA will be obliged to follow best international practices. It has a legal obligation to work in consultation with stakeholders and in a transparent manner. If it does not and there is no reason to think that it won’t – then it would have failed in its mission. There is a lot of confusion over how much revenues are generated from the state’s control of the two mobile networks. First, it should be recognized that the telecom sector and mobiles in particular – are overtaxed. Of the $900 million in gross revenues (approximately) expected in 2005, as direct revenues from the two mobile operators, about $200 million are from the value-added tax and the airtime tax (the 6 cents per minute), which are due to the treasury in any case. Another $40 million is from international calls, which is paid back to the ministry which still has exclusivity over international calls; about $100 million is paid to the two network operators in terms of management fees and incentive bonuses; and another $40 million has to be deducted to cover capital expenditures. The ministry of telecommunication’s net revenues from the sector in 2005, are expected to be around $520 million from the two mobile networks. However, in order to compare the revenues from the management contract with the revenues from BOT, one would need to factor in the following: 1) that there has been a growth in subscribers of 10% in 2004 and 23% in 2005, which could have even been greater had it not been for the artificial constraint on new numbers that was in place between 2000 and 2003; and 2) that the cost of severing the two mobile BOT contracts has been, to this day, about US$220 million (US$180 million for the recovery of the two networks and another US$40 million for the employees‚ golden handshakes), but that we still do not know the full impact of the arbitration decisions, which will be at a minimum US$200 million if the disputes are resolved amicably in line with the agreement between the ministry and France Telecom and a lot more if there is no amicable resolution.
In addition to the financial cost, the economic cost should be taken into account. The dispute with the mobile operators has led to significant delays in the sector. Lebanon was once a regional leader in mobile telecommunications and now it is no longer. Lebanon’s mobile market today offers fewer choices than almost any other market in the region (save, perhaps, Syria). Thirdly, mobile prices in Lebanon remain the highest in the region, thereby taxing Lebanese consumers. Finally, investments in mobile telecommunications have dried up. For example, no more than $40 million has been invested in mobile telecoms in Lebanon in the last 18 months whereas anywhere between $80 million to $100 million should have been invested annually in the last three years.
President of Telesupport International, part of the
International Technology Group and one of the first call centers established in Lebanon
E The February 2005 initiative to promote Lebanon as a call center hub was stalled by the subsequent political events. Could the call center industry still be developed here and what would have to be done to support it and promote Lebanon as a location of regional/international call centers?
The main goal that the Lebanese government has to embark on is to improve and promote the image of Lebanon abroad, as Lebanon is still associated with war. At a current local rate of $17,000/E1 – a high speed digital link which represents 2mb/s (two megabytes per second), the international companies will find it very expensive to set up call centers and we need to implement many rules and regulations to attract more international companies. The first thing to do is to decrease the rate on E1s to a reasonable level, which is below $1,000 as in Jordan. The second thing is to promote Lebanon as a safe tourist destination to show that it is stable and has prospered in the past 15 years, a fact many countries are not aware of until now. Lebanon has the backbones for establishing international call centers. It is trilingual in English, French and Arabic and has high literacy rates and skilled labor. In this context, Lebanon is stationed as the leading country in the region to host international call centers of the Middle East. The establishment of international call centers could boost the economy by generating a mere $30 million per year through job creation if it is implemented on a small scale because we have the basic components for developing this sector and that is the human resources. But the prospects would be ten times higher if Lebanon can develop this sector before other neighboring countries do it.
Commercial manager at Inconet Data Management (IDM)
E Broadband connectivity has been promised for 2006. What are the main benefits for corporate Lebanon if the technology arrives with such huge delays when compared to other countries?
While other countries like Jordan are taking advantage of the technological, business and education opportunities of the broadband era by introducing their broadband services at 512 kb/s (kilobytes per second) or 1024 kb/s (1mb/s) for $48 per month, Lebanon is still lagging behind with internet speeds of 256k at double the cost. Broadband connectivity will be implemented in 2006. DSLAM (Digital Subscriber Line Access Multiplexer), which is a mechanism at a phone company’s central location that links many customer DSL (digital subscriber line) connections to a single high-speed ATM (Asynchronous Transfer Mode) line, will be soon entrenched. Lebanon is setting broadband connectivity at a soaring price of $17,000 per month for an E1 connection. The government has recently acquired around 180 E1s to add them to the existing 45 E1s to have a total of 225 E1s that are going to be available in 2006.
Managing director of Connexus Consulting
E Broadband connectivity has been promised for 2006. What are the main benefits for corporate Lebanon if the technology arrives with such huge delays compared to other countries?
If prices are lowered from $17,000 per month to $3,000 per month for an international E1, the government can still generate revenues of $10 million per year. This will allow broadband connectivity of 512kb/s to 1 mb/s when in other countries in the region such as Jordan, Egypt, and Morocco, this has been on offer for a number of years. But even at $3,000 per month for an E1, international connectivity is still very expensive and will not unleash the full potential of information technology in Lebanon. The proposed lowering of prices is a necessity but it should be seen only as a first step.