Beirut

1
Presentation
Regional Telecom Trends and Strategic Options for
Liban Telecom
Beirut September 22, 2004
Ministry of Telecommunications
2
This paper presents the strategic considerations
for the creation and privatization of Liban
Telecom in the context of the regional
telecommunications sector trends

• The M.E. telecom sector has progressed at an
  unprecedented pace since 1998, creating an
  unexpected democratization of communications
  services
• The underlying driver was, is, and will continue
  to be a universal acceptance of deregulation as
  an indispensable process to develop the sector
• Concept is now widely anchored among policy
  makers, albeit at different stages of maturity
• Challenge has evolved from why to how to
  deregulate, and the M.E. still has a long way to
  go
• The Lebanese telecommunications market is likely
  to accompany the regional liberalization trend
• The emerging environment poses considerable
  challenges for incumbent operators as they
  fast-track their readiness to meet the future
  challenges
• The corporatization and privatization of Liban
  Telecom is a potential vehicle for increasing the
  incumbents readiness for market liberalization
  and full competition

3
Total Connectivity has progressed rapidly,
averaging between 22 and 31 per year
4
positioning the total region well ahead of the
world average
5
Market liberalization is creating a new set of
challenges for incumbent operators
6
Privatization and the level of market focus are
key factors in shaping the incumbents readiness
to meet future challenges and risks
7
Case in point is Algerie Telecoms inhibited
performance in the cellular segment post partial
liberalization
8
which contrasts with Maroc Telecoms
performance over the same period
9
In Lebanon, the formation and privatization of
Liban Telecom is defined in Part VIII of the
Telecommunications Law
Selected Legal Requirements Pertaining to Liban
Telecom

• The company will be constituted by decree taken
  in the Council of Ministers, upon recommendation
  of the Minister, as a joint-stock company
• Due process, led by independent and expert
  parties, will apply to the evaluation of assets,
  rights, obligations and current operations for
  potential transfer to Liban Telecom. The company
  will be owned by the State of Lebanon, until such
  time it is privatized
• The Board of Directors and Chairman will be
  appointed by the Council of Ministers, as long as
  all shares are owned by the State of Lebanon
• Liban Telecom may be granted exclusivity to
  provide any of basic telephone service, voice
  public-international service, telex and telegraph
  service (local, international), for a period not
  exceeding five years from date of its formation
• The government may, by decree taken in the
  council of Ministers and within a maximum period
  of two years from date of constitution of the
  Company, proceed with the sale of not more than
  40 percent of shares of the company to a
  strategic partner. The partner will be
  entrusted with the management of the Company as
  long as he shall continue to hold at least half
  of the shares originally purchased
• The Council of Ministers, upon recommendation of
  the Minister, shall determine dates of selling
  the remaining shares owned by the State to
  private sector investors
• Staff from Ministry and OGERO may be selected by
  Liban Telecom based on terms of selection to be
  developed within three months following the
  appointment of the Board of Directors, in
  coordination with the Minister. If selected,
  employees will enter into agreement with Liban
  Telecom

Source Adapted from Telecommunications Laws as
published in the Official Gazette on July 23, 2002
10
Liban Telecom should undergo firstly a
corporatization phase followed by partial
privatization
11
The end game of the phased approach is value
creation
12
The operating model at Liban Telecom could likely
be one of a holding structure with fully
accountable business units, and corporate center
and a group of shared services
13
which would allow Liban Telecom to selectively
acquire strategic partners, as required per
business unit should there be a decision to do so
14
The envisaged model entails a shift from the
functional structure currently prevailing at the
MoPT and OGERO
Current MoPT Structure
15
to one that is sector specific
16
The roll-out of the envisaged business model
raises a series of challenges for Liban Telecom
17
1. Financial Dimensions
18
2. Customer Dimensions
19
3. Technology Dimensions
20
4. Operating Dimensions
21
Liban Telecom could target a 12-18 month
corporatization readiness program
22
Competition in Mobile services is likely to
follow one of three scenarios
23
In summary, Lebanon can accompany the
liberalization and privatization trend in the
region through effective market liberalization
and the privatization of Liban Telecom

• Telecom market liberalization is inducing
  significant growth in the region
• Competition driving the introduction of new
  services and more favorable prices
• Privatization is enhancing the incumbent's
  ability to compete effectively and add further
  value to consumers
• Corporatization of incumbents aims to create
  value prior to privatization in order to maximize
  returns
• Liban Telecom should aim to face financial,
  customer, technology and operational challenges
  with a systematic and concerted corporatization
  program
• Once a market scenario is adopted for mobile
  competition, Liban Telecom should be ready to
  capture the related advantages and mitigate risks
  associated with the scenarios disadvantages