VZCZCXRO5420
PP RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV
DE RUEHLB #1476/01 2881619
ZNR UUUUU ZZH
P 141619Z OCT 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC PRIORITY 3278
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUCNDT/USMISSION USUN NEW YORK 3039
RUEATRS/DEPT OF TREASURY WASHDC
RUEHNO/USMISSION USNATO 3250
RHMFISS/CDR USCENTCOM MACDILL AFB FL
RHEHAAA/NSC WASHDC

UNCLAS SECTION 01 OF 03 BEIRUT 001476 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR NEA/FO, NEA/ELA 
ALSO FOR EEB DEMARCELLUS, GIBBS, JACOBY AND EGAN 
COMMERCE FOR A/S HERNANDEZ, USDOC/ITA REED, LOUSTAUNAU, 
SAMS, WIEGLER 
TREASURY FOR STEPHANIE AHERN 
STATE PASS TO AID FOR JIM BEVER, ELAINE SCOTT 
NSC FOR ABRAMS/RAMCHAND/YERGER/MCDERMOTT 
USAID FOR BEVER/LAUDATO/SCOTT 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EFIN EINV ECPS EINT EAID BEXP LE
SUBJECT: LEBANON: TELECOM MINISTER ENTHUSIASTIC ON 
PRIVATIZATION, BUT WANTS LIMITS ON FOREIGN OWNERSHIP OF 
MOBILE COMPANIES 
 
SUMMARY 
---------- 
 
¶1. (SBU) In an October 9 meeting with Commerce A/S Israel 
Hernandez and the Ambassador, Minister of Telecommunications 
Gebran Bassil inquired about the status of the two missing 
American journalists and talked about the significance of the 
case for Lebanon.  He was enthusiastic about the Embassy 
Commercial Service,s Made in America trade fair, and said he 
hoped it would expand to become a regional event in the 
future. 
 
¶2. (SBU) Bassil talked about his plans for broadband 
deployment across Lebanon, and believed it would be available 
to 90 percent of fixed telephone line subscribers by the end 
of 2009.  He expounded on how broadband could contribute to 
development in Lebanon, from e-government to call centers. 
He said he was working hard to build the political consensus 
necessary for privatization of mobile telecom licenses, and 
that he would advocate a limit on foreign ownership in the 
privatized firms.  End summary. 
 
MISSING AMERICAN JOURNALISTS: 
WE DO NOT WANT TO RETURN TO THE 1980s 
---------- 
 
¶3. (SBU) Visiting Commerce A/S Israel Hernandez, Ambassador, 
USDOC Foreign Commercial Service ANESA Director Christian 
Reed, SCO Cairo, EconCommOff, and Senior Commercial 
Specialist called on Minister of Telecommunications Gebran 
Bassil in his ministry office October 9.  Bassil started the 
meeting by inquiring about two American journalists who had 
gone missing in Lebanon, saying the case was very worrying. 
He said he hoped it would not turn out to be a kidnapping. 
"We had enough kidnappings in the 80s," he said.  "We don,t 
want to go backwards."  He returned to the topic several 
times during the meeting, noting that cases like this were 
not only tragic in and of themselves, but that they were bad 
for Lebanon, both politically and economically.  (Note: The 
journalists were located later that day in Syrian custody; 
they were subsequently released. End note.) 
 
MADE IN AMERICA 
---------- 
 
¶4. (SBU) A/S Hernandez told Bassil that he was in Beirut for 
the opening of the Made in America trade fair, which took 
place October 9-11 with the participation of more than 270 
exhibitors.  He noted that the show had grown dramatically 
since it was last held in 2005, and that many new companies 
were participating, showing growing interest in the Lebanese 
market.  Bassil said this was an important event, something 
that is good for the U.S. as well as Lebanon, and he hoped it 
would grow bigger in the coming years.  He said it was 
crucial for the event to take place and have a positive 
impact, since during the 2006 war between Israel and 
Hizballah, the fair was used by some to make the United 
States look bad.  (Note: During and after the 2006 war, 
residents took publicity posters from the 2005 Made in 
America fair and placed them on bombed-out buildings.  End 
note.) 
 
WHAT BROADBAND CAN DO FOR LEBANON 
---------- 
 
¶5. (SBU) A/S Hernandez asked Bassil about his major 
initiatives as Minister.  Bassil said he was working hard to 
expand access to broadband to all parts of Lebanon.  He 
explained that the first step was to reallocate the spectrum, 
which had previously been allocated in a very inefficient 
fashion, and he was working with the Telecom Regulatory 
Authority to do this in a transparent way.  Once spectrum 
allocation was done properly, it would help companies provide 
 
BEIRUT 00001476  002 OF 003 
 
 
better service at a lower price.  This was a regulatory 
issue, he said, but meanwhile, "we have an alley and should 
have a highway.". 
 
¶6. (SBU) Bassil said internet broadband service would be 
expanded in the coming months in all the major metropolitan 
areas, and would reach at least 70 percent of fixed telephone 
line subscribers by the end of 2008.  He would then turn to 
the rural areas, and he believed he could provide access to 
90 percent of fixed line subscribers by the end of 2009. 
Meanwhile, he would also authorize the use of wireless 
technology, which has not been used in Lebanon extensively, 
to reach as many people as possible as quickly as possible. 
 
¶7. (SBU) Bassil thanked the Ambassador and Hernandez for U.S. 
Embassy support for a new e-North broadband deployment 
project, whose contributors include the Partnership for 
Lebanon (a grouping of U.S. companies committed to the 
reconstruction of Lebanon following the 2006 war), Lebanese 
and regional information technology associations, and NGOs. 
Bassil said the project was not moving forward as quickly as 
he would like, but he liked the premise of the project, to 
bring broadband to the poor northern regions of Lebanon, and 
integrate schools and municipalities through broadband 
connectivity.  He said he hoped the project would demonstrate 
the role information technology can play in development. 
 
¶8. (SBU) The Minister said he could use U.S. help in bringing 
call centers to Lebanon, particularly once the broadband 
infrastructure was deployed.  He claimed the centers could 
create 50,000 jobs in Lebanon, with Voice over Internet 
Protocol keeping costs low for companies. "We are all 
trilingual and have a better accent than the Indians.  We 
must make this happen," said Bassil. 
 
¶9. (SBU) Bassil mentioned that he was planning a forum in 
Beirut for Lebanese professionals working abroad in the 
telecom field.  He said now was the time to show them the 
opportunities available in the sector, and hopefully they 
would bring their talents back to Lebanon. 
 
STATUS OF MOBILE TELECOMS IN LEBANON "SHAMEFUL"; 
PRIVATIZATION WILL HAPPEN, BUT TERMS NOT SET YET 
---------- 
 
¶10. (SBU) Bassil described the current state of mobile 
telecoms in Lebanon, saying, "Right now we are in a 
disastrous situation.  In 1994 we were the first in the 
region to have GSM service, we were ahead of everyone else," 
he said.  Since then, he claimed, nothing has improved, as 
private mobile companies were nationalized and are now being 
prepared again for privatization.  He noted that cell phone 
penetration in Lebanon was only 28 percent, and prices were 
very expensive.  "It,s shameful," he said. 
 
¶11. (SBU) Bassil said he was working on forging a political 
consensus in favor of privatization, something his political 
position has been helpful in doing.  (Note: Bassil is part of 
the Lebanese opposition.  End note.)  He said he thought he 
could "drag" his political partners into the consensus.  He 
said he would hold a workshop around October 22 at which all 
relevant stakeholders would consider the options for the 
terms for the auction of mobile licenses to the private 
sector.  They would also have to look at the timing of an 
auction, he added, in which the status of the international 
financial crisis would play a role. 
 
¶12. (SBU) The Minister noted that the proceeds of the license 
sale were to be used to pay part of Lebanon's sovereign debt, 
which is currently above 170 percent of GDP.  He worried that 
paying off USD 5 billion of a national debt of more than USD 
40 billion would only make a small dent in Lebanon's debt 
position, while the loss of the telecom companies' revenues 
 
BEIRUT 00001476  003 OF 003 
 
 
-- which currently account for more than 42 percent of 
government revenues -- might mean debt would simply mount 
again following the privatization.  He said he was therefore 
looking at ways of preserving a revenue stream from mobile 
telecoms after the privatization. 
 
¶13. (SBU) Bassil said he was looking to secure the 
participation of Lebanese in the privatization, saying he did 
not want to move from a state monopoly to a monopoly of a 
foreign operator.  He wants to have foreigners bring 
competition to the market, he said, while Lebanese expertise 
contributes.  He suggested that the state fixed line monopoly 
Liban Telecom should be issued a third mobile license to give 
it a chance to compete.  Liban Telecom would be privatized 
later, he said. He believed the two remaining licenses should 
have limits on foreign ownership, but with management control 
given to foreigners. 
 
¶14. (SBU) Bassil told A/S Hernandez he would like to see 
American companies take part in the sale.  "This is a good 
market," he said.  "Don,t think of it as the third world. 
The mentality of the people is different here."  Meanwhile, 
said Bassil, he planned a rapid expansion of service.  Lower 
prices and improved service should bring penetration rates up 
to 40-50 percent in the next eight months, he said. 
 
COMMENT 
---------- 
 
¶15. (SBU) Bassil is enthusiastic about achieving as much as 
he can during his tenure as Minister.  While his concern 
about the state of GOL finances is laudable, limiting foreign 
ownership in the privatized companies may affect the level of 
interest and price the GOL can receive for the licenses at 
auction.  Insistence on Lebanese participation also could 
open the door for corruption.  End comment. 
SISON