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FM AMCONSUL JERUSALEM
TO RUEHC/SECSTATE WASHDC PRIORITY 6119
INFO RUEHXK/ARAB ISRAELI COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 JERUSALEM 001711 
 
SIPDIS 
 
NEA FOR IPA, NSC FOR SHAPIRO/KUMAR, JOINT STAFF FOR LT GEN 
SELVA 
 
E.O. 12958: DECL: 09/19/2019 
TAGS: ECON KPAL KWBG IS GZ PGOV
SUBJECT: PALTEL EXECUTIVES ON GAZA OPERATIONS, WATANIYA, 
AND THE TROUBLED ZAIN MERGER 
 
REF: JERUSALEM 618 
 
Classified By: A/PO Greg Marchese for reasons 1.4 (b) and (d) 
 
¶1. (C) Summary.  Acting PalTel CEO Kamal Abu Khadijeh and 
Vice President Kamal Husseini claimed in a September 17 
meeting that PalTel, the monopoly fixed-line and mobile 
provider in the West Bank and Gaza, faces several challenges, 
including a stalled merger between its mobile operator and 
Zain Jordan, continued rumors of its former CEO bribing 
Israeli officials to block the Wataniya launch, and too 
little spectrum for its own wireless operations.  While 
Khadijeh and Husseini do not expect PalTel's revenue (valued 
at around 12% of GDP in 2008) to shrink as a result this 
year, they warned that PalTel's experience coupled with 
Wataniya's continued difficulties, could scare potential 
investors away from the IT sector and the West Bank as a 
whole.  End Summary. 
 
Jawwal: Preconditions to Release Frequencies to Wataniya 
--------------------------------------------- ----------- 
 
¶2. (C) The acting CEO of PalTel, Kamal Abu Khadijeh, said 
that PalTel's mobile phone company, Jawwal, is already 
oversubscribed and in need of additional spectrum, with 1.6 
million subscribers on a 4.8 MHz spectrum allocation on the 
900 band (2.4 MHz for Jawwal alone and 2.4 MHz shared with 
Israeli cellular operator Orange).  The benchmark, he said, 
should be what all Israeli cellular and Jordanian companies 
operate on:  8.0 MHz.  Khadijeh noted that Jawwal had 
constructed 72 towers in Ramallah -- the same number of 
towers that cellular operators rely on in the much larger 
market of Riyadh -- to compensate for the lack of spectrum. 
PalTel, however, had taken a decision not to seek more 
spectrum until Wataniya's case was settled, he said.  Abu 
Khadijeh emphasized that Jawwal would only consider releasing 
spectrum to Wataniya in the 900 MHz range in exchange for an 
allocation from the GOI in the 1800 MHz range (one of the 
options in the 2008 agreement) after several conditions had 
been met:  importation and installation of new 1800 
MHz-specific equipment, removal and re-export of the old 900 
MHz equipment, and reimbursement of USD 120 million to cover 
the cost of the equipment switch. 
 
Jawwal Operations in Gaza 
------------------------- 
 
¶3. (C) According to Abu Khadijeh, PalTel employs 1,000 people 
in Gaza, where 40% of its mobile subscribers live.  He 
acknowledged that PalTel "has to talk to Hamas" to maintain 
its operations, but claimed that he had not paid any taxes or 
licensing fees to Hamas in Gaza.  He said that, when Hamas 
asked for money, PalTel replied that, as soon as Hamas 
coordinated with the GOI to allocate needed frequencies and 
secure permission to import necessary equipment, PalTel would 
pay the licensing fees, as it had to the PA.  The company has 
been prevented from repairing its damaged equipment, but 
Hamas is allowing Jawwal to operate, Khadijeh said.  "If 
Hamas could operate the network, they would have kicked us 
out.  But they don't have the technical expertise and we 
could cut the international connection," he added.  Abu 
Khadijeh characterized Jawwal's relationship with Hamas as an 
uneasy detente.  "They know our redlines and we know theirs," 
he said. 
 
Zain's Failure to Launch 
------------------------ 
 
¶4. (C) The merger of PalTel with regional mobile operator, 
Zain, and Jawwal's re-branding is still stalled with no end 
in sight, said Abu Khadijeh.  He insinuated that the only 
reason for the delay is because the Palestinian tax code 
currently requires multinationals that register in Palestine 
to pay tax on their international as well as domestic 
operations.  Abu Khadijeh said he had no timeline for when 
the PA might make the necessary adjustments to the tax law. 
(Note: In a separate meeting, PA Cabinet Secretary Hasan Abu 
Libdeh said the merger's delay had nothing to do with the PA, 
and blamed disagreements over valuations between PalTel and 
Zain.)  With no launch date in sight, white sheets cover the 
signs on Jawwal/Zain's storefronts.  Zain's failure to launch 
has taken away what Abu Khadijeh called Jawwal's "competitive 
edge" over Wataniya:  the Jordan-based switch that would have 
allowed its customers to avoid incurring international 
roaming charges in Jordan.  He claimed that continued 
 
JERUSALEM 00001711  002 OF 002 
 
 
uncertainty had taken a toll on PalTel's stock price, as well 
as on the Palestinian Stock Exchange as a whole. 
 
Rumors about the Former CEO 
--------------------------- 
 
¶5. (C) Abdel Malik al-Jabr, CEO of Zain Levant and the former 
CEO of PalTel, was suffering from a rumor campaign that he 
had bribed Israeli officials to thwart Wataniya's launch 
(reftel), PalTel Vice President Kamal Husseini claimed. 
Husseini added that al-Jabr would be in Ramallah on September 
18 for meetings, despite warnings from the PA President's 
office to stay away.  (Note: Abu Mazen's IT advisor, Sabri 
Saidam, told us September 14 that the Attorney General would 
bring charges against al-Jabr shortly.)  Every time 
Wataniya's launch was delayed, the rumors about al-Jabr's 
corruption surfaced again, Husseini said.  He claimed this 
hurt "both the credibility of the PA and PalTel." 
MARCHESE