Cablegate: Lebanon: Telecom Minister Enthusiastic On

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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

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