VZCZCXRO0918
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHIK RUEHKUK RUEHLZ RUEHROV RUEHSR
DE RUEHLB #1630/01 3190928
ZNR UUUUU ZZH
R 140928Z NOV 08
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 3564
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RHEHAAA/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 BEIRUT 001630 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR NEA/ELA, EEB/IFD/ODF, EEB/CIP/BA 
STATE PASS USTR FRANCESCKI 
STATE PASS USAID BEVER/LAUDATO/SCOTT 
TREASURY FOR PARODI/BLEIWEISS/AHERN 
USDOC FOR 4520/ITA/MAC/ONE 
NSC FOR ABRAMS/RAMCHAND/YERGER/MCDERMOTT 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PREL PGOV LE
SUBJECT: LEBANON: TELECOM PRIVATIZATION ON TRACK, BUT UNLIKELY 
BEFORE THE ELECTIONS 
 
REF: BEIRUT 1627 
 
SUMMARY 
------- 
 
¶1. (SBU) In recent weeks, Embassy contacts have publicly and 
privately expressed doubts that the privatization of mobile telecom 
licenses can take place before the spring 2009 parliamentary 
elections.  Most contacts blame poor market conditions following the 
international financial crisis for the likely delay.  Nonetheless, 
all government officials involved in preparing the privatization say 
there is political will to privatize, and that it will happen, most 
likely in the months following the elections.  Despite talk of the 
GOL imposing foreign ownership restrictions on the licenses or 
imposing revenue-sharing schemes, post believes the privatization 
will go through when the market improves, and the USG should not 
push the Siniora government to privatize too soon if it would hurt 
the government politically.  End summary. 
 
NO PRIVATIZATION BEFORE THE ELECTIONS... 
-------------------- 
 
¶2. (SBU) Privately and publicly, an increasing number of GOL and 
foreign officials have been expressing doubts about the likelihood 
of mobile privatization taking place before the 2009 elections.  On 
November 1, French daily L'Orient le Jour quoted SYG of the Higher 
Council for Privatization Ziad Hayek as saying that mobile 
privatization may be delayed.  He attributed the delay to current 
market conditions, which would make it difficult for interested 
companies to get financing.  However, Hayek commended the Minister 
of Telecommunications Gebran Bassil's efforts to improve the mobile 
network in the meantime. 
 
¶3. (SBU) World Bank country Manager Demba Ba told us November 4 that 
he concurred with Hayek, saying that international market conditions 
are not likely to attract investors for mobile privatization.  PM 
Senior Advisor Ghassan Taher shares Ba's views, and publicly said to 
donor country representatives at a Paris III donor meeting on 
October 23 that privatization could be difficult to achieve in 2009. 
 
 
¶4. (SBU) Hayek told us on November 10 that the GOL may want to wait 
for better market conditions, noting that current conditions could 
lower the valuation of the two mobile licenses.  Hayek said Bassil 
is nonetheless still building political support for mobile 
privatization, and will hold a workshop for stakeholders in early 
December. 
 
...BUT PERHAPS RIGHT AFTER 
------------- 
 
¶5. (SBU) Telecom Regulatory Authority (TRA) Chairman Kamal Shehadi 
believes mobile privatization is possible in the first half of 2009 
if the GOL can summon up political will.  He refuted claims that 
current market conditions make it difficult for investors to get 
financing, and told us November 4 that eight out of the ten 
companies that have expressed interest in bidding for a mobile 
license are from countries that have so far been only minimally 
affected by the financial crisis and thus would be able to bid. 
Regarding SYG Hayek's remarks, Shehadi said "he spoke too soon." 
 
¶6. (U) On November 8, Finance Minister Mohammad Chatah told 
English-language newspaper The Daily Star that although the legal 
and technical aspects of mobile privatization should be ready, 
privatization may not happen before the 2009 parliamentary 
elections.  Chatah said Paris III donor countries were not pressing 
Lebanon "to privatize the mobile networks before the election, but 
they want to see some steps taken by the government that will pave 
the way for the privatization." 
 
¶7. (SBU) In a November 11 meeting, Chatah told us there is support 
for telecom privatization across the political spectrum, and that it 
will go forward, though there may be restrictions on foreign 
ownership or other conditions set to ensure political consensus. 
Chatah said political and market conditions might affect the timing, 
but the sale still should go through either in the spring before the 
elections, or in the fall, soon after them.  He noted that if the 
sale went through under the current conditions, the GOL could be 
accused of cheating the people out of a receiving a fair price for 
 
BEIRUT 00001630  002 OF 002 
 
 
state assets. 
 
COMMENT 
------- 
 
¶8. (SBU) Post believes it is increasingly unlikely that mobile 
privatization will occur prior to the 2009 parliamentary elections. 
Though the USG has been anxious to see privatization sooner rather 
than later, to ensure disbursement of the final tranche of USG 
budgetary support funds pledged at Paris III, the main issue seems 
to be market conditions in the wake of the world financial crisis, 
and not a lack of political will.  If the GOL thinks a few extra 
months' wait can significantly increase the bids it can receive for 
the licenses, perhaps it is prudent for it, and the USG, to wait. 
Ultimately, forcing through a privatization under poor market 
conditions could hurt the Siniora government and all those working 
for reform and democracy in Lebanon.  End comment. 
 
SISON