2003 resolutions for Lebanon: Liban Telecom to be privatized and GSM market to reawaken

This law is planned to reform the telecom sector and will create a separate regulatory body and a telecom operator (Liban Telecom). It will also become the foundation of the required legal framework to privatize the sector and make all government involvement transparent and well defined.

A new comprehensive country report, "Lebanon Communications Projections Report 2003." was released to the Arab Advisors Group's (www.arabadvisors.com) Strategic Research Service subscribers on March 18, 2003. The 55-pages report analyses the current situation of the Lebanese Communications Market and provides five-year forecasts of more than 40 Demographic, Economic and Telecom Infrastructure indicators. It also fully analyses OGERO and the two GSM operators in the market, their strategy for the future and the equipment vendors' landscape.

"The long GSM crisis in Lebanon, that has crippled growth in the market since June 2001, is on the verge of resolution." Arab Advisors Group's senior analyst, Sami Sunna' said. "There has been a transfer of ownership of both operators, LibanCell and Cellis, to the hands of the Lebanese government after the two operators were compensated. The next step in Lebanon is the sale of the two GSM operators, expected in early 2003, and further liberalization of the telecom sector." Mr. Sunna' added.

The Arab Advisors Group believes that unilaterally canceling a signed BOT agreement with international operators diminished the confidence of many potential new entrants into the Lebanese communication markets. We expect any future entrants to factor in this low confidence into their financial bids, translating into lower than fair-value bids.

"Despite plans to privatize and liberalize the fixed sector, the Arab Advisors Group does not foresee spectacular growth in this segment. Between 2002 and 2007, we project Lebanon's PSTN market to grow by a CAGR of 1.9% only and maintain a penetration rate of around 21%." Mr. Sunna' explained. "Indeed, competition on the International Long Distance service is projected to cause Lebanon's total PSTN revenues to decline annually by 3.9% to reach around US$ 415.8 million in 2007, compared to around US$ 507.8 million in 2002."

However, Lebanon's GSM market is a different story. The GSM market is expected to grow substantially during the forecast period and the market will remain a predominantly prepay market. The Arab Advisors Group projects Lebanon's GSM market to grow by a CAGR of 16.7% to reach a penetration level of 42% in 2007. The number of cellular subscribers is projected to exceed the number of mainlines in 2003 after briefly exceeding them in 2001 (before the start of the GSM crisis which stifled GSM growth). Lebanon's total GSM revenues are projected to reach more than US$ 884.7 million in 2007.