VZCZCXRO4246
PP RUEHAG RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHLB #1703/01 3041300
ZNY CCCCC ZZH
P 311300Z OCT 07
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC PRIORITY 9917
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHNO/USMISSION USNATO 1800
RHMFISS/CDR USCENTCOM MACDILL AFB FL
RHEHNSC/NSC WASHDC

C O N F I D E N T I A L SECTION 01 OF 02 BEIRUT 001703 
 
SIPDIS 
 
SIPDIS 
 
NSC FOR ABRAMS/SINGH/GAVITO/YERGER/DEMOPULOS, STATE FOR 
NEA/ELA, NEA/FO:KHARRINGTON, MPOPAL, 
 
E.O. 12958: DECL: 10/30/2017 
TAGS: ENIV PGOV PREL PTER LE
SUBJECT: LEBANON:  TELECOM PRIVATIZATON LABOR WOES MAY 
AFFECT OTHER PRIVATIZATIONS 
 
REF: BEIRUT 1546 
 
Classified By: DCM William Grant for reasons 1.4 (b) and (d) 
 
SUMMARY 
------- 
 
¶1. (C) Two well-placed telecom officials say the progress of 
the sale of the two initial mobile licenses is going well. 
Both view privatization of the fixed line company, Ogero, 
with dissatisfaction, due in large part to their negative 
feelings regarding the Ministry of Telecommunications's 
Director General.  Labor issues arising in the telecom sector 
privatizations may cause problems for the GOL in other 
sectors in the future.    End Summary. 
 
¶2. (C) On October 24, 2007, Econoff and Econstaff met with 
Ziad Hayek, Chairman of the Higher Council for Privatization, 
and Gilbert Najjar, Chairman of the Owner Operator Board of 
the Ministry of Telecommunications, to evaluate the progress 
of the privatization of the mobile telecom sector, as well as 
the fixed line company. 
 
STATUS OF THE SALE OF 
THE MOBILE LICENSES 
------------------- 
 
¶3. (C) Hayek confirmed that he and the Telecommunications 
Regulatory Authority (TRA) are very satisfied with the 
progress of the program to sell the two mobile licenses, 
describing it as "very professional," with no political 
interference.  Potential buyers from the region and from 
Europe have indicated interest, as well as some U.S. 
investment funds, which would need to partner with operators. 
 At the last meeting on October 27 the cabinet approved for 
the second and final time the sale of the licenses, and there 
will be a press conference to announce the launch on Friday, 
November 2, 2007. 
 
"SELLING" THE SALE 
------------------ 
 
¶4. (C) Hayek said there is not universal approval for the 
idea of privatizing the telecom sector, and he is working to 
overcome any opposition.  He has been on TV and in the 
newspapers, giving interviews with any media outlet that 
wants to talk about the issue, although he says many of the 
major political players are "tired" of talking about it. 
Hayek has a real interest in meeting and talking to the more 
difficult opponents, but despite his requests, he has been 
unable so far to get appointments with Hizballah, the Amal 
political party or other leading groups respresenting the 
Shia population.  (Note: We discussed this issue with Yassine 
Jaber, who represents the Amal viewpoint.  Septel)  After 
asking for funding for a public relations campaign for almost 
a year, he received approval six weeks ago, but he is not yet 
satisfied with the progress of the campaign. 
 
MORE DOUBT ON FIXED LINE 
PRIVATIZATION 
------------- 
 
¶5. (C) Both Hayek and Najjar maintained a thin-lipped 
near-silence when asked to discuss any progress in the 
transformation of the fixed line GOL company, Ogero, to the 
potentially private Liban Telecom.  Najjar would only say 
that this is between Telecom Minister Marwan Hamadeh and the 
Director General Abdul Meunim Youssef, and Najjar is 
completely uninformed.  Hayek was a bit more forthcoming, and 
pointed out that what appears to be an accident of 
interpretation by a consultant's report allowed Ogero to 
escape from the authority of the HCP.  He confirmed that the 
cabinet had recently extended the term of the Ogero board 
(reftel), but only for three months, and only after a very 
heated discussion.  Hayek said that DG Youssef has close 
relations with both Hamadeh and Prime Minister Fouad Siniora 
, but is "completely incompetent."  He hinted at the 
potential for ongoing corruption in the new company, linking 
it to the Chinese "donation" of GSM equipment.  He also 
confirmed Ogero usurpation of bandwidth, which we heard about 
previously (reftel). 
 
LABOR ISSUES 
------------ 
 
 
BEIRUT 00001703  002 OF 002 
 
 
¶6. (C) Najjar summarized the current issues with employees of 
the two GOL-owned, privately managed mobile telephone 
companies, Alpha and MTC.  He said that he believes that the 
GOL is using the labor problem to mask greater problems in 
the sector, such as the Hizballah telephone network.  The 800 
employees of the two companies are threatening to strike over 
the issues of continuation of service and indemnity resulting 
from the sale of the two companies proposed to take place in 
February 2008.  Minister of Telecommunications Marwan Hamadeh 
asked the cabinet for a commitment to thirty months of 
employment for all employees after the sale of the two 
companies.  After what were reportedly heated discussions, 
the cabinet agreed to only 18 months.  Najjar believes that 
both the discussion and the final agreement were mistakes. 
 
MOBILE EMPLOYEES GREEDY? 
------------------------ 
 
¶7. (C) The GOL set what could become a precedent when it took 
over the two previous private mobile companies, by offering 
both continuation of service and financial indemnities to 
employees, paying out about $20 million per company.  About 
185 employees out of 400 in each company benefited from this 
previously.  Those employees have apparently persuaded the 
newer employees that they can negotiate the same arrangement 
now.  The court has ruled that this cannot be a class action 
suit, since these are two different classes of plaintiffs, 
but the discussions continue.  Najjar believes that Hamadeh 
does not intend to offer more than the 18 months, but has 
asked Najjar to "drag out" discussions with the employee 
syndicate, possibly to obscure other questionable practices 
(NFI).  The employees have upped their demand, now asking for 
48 months of guaranteed employment and 30 months salary if 
they quit after the sale. 
 
POLITICAL 
RAMIFICATIONS 
------------- 
 
¶8. (C) One question is the impact any agreement to protect 
employees of this type might have on other efforts to 
privatize, such as the electricity sector.  However, the head 
of the employee syndicate is from the Lebanese Forces party, 
part of the government March 14 coaltion, and Najjar believes 
that this gesture was a political decision, made with full 
knowledge that there could be major problems in the future. 
(Note: In a meeting on November 27, 2007, the cabinet 
discussed the extension of the management of the two mobile 
companies.  It was immediately reported in the media that the 
cabinet had extended the contracts of the two mobile 
companies by six months, after their current terms expire in 
June 2008.  Even Minister of Information Aridi reported that 
on television.  In fact, after review of the minutes of the 
meeting, the exact decision was to assign to the Prime 
Minister, the Minister of Telecommunications, and the 
Minister of Finance the authority to negotiate the extension 
of the management contracts as necessary, based on the 
privatization process.  End note.) 
GOL-owned, privately managed mobile telephone companies, 
Alpha and MTC 
 
 
FELTMAN