Liberalising Lebanon

Lebanon's mobile sector has enormous potential, but its growth hinges on the government's commitment to liberalisation.

Lebanon's telecom sector has been in the spotlight in the past couple of months, with the government's decision to delay the auction of stakes in the country's state-run mobile companies, and political problems slowing down the potential privatisation of its fixed-line operator.

For most players in the sector, Lebanon's telecommunications industry, both mobile and fixed-line, has much potential, but delays to the introduction of competition are doing little to help the industry achieve its potential.

Indeed, the slow pace of change in the sector has left Lebanon with low mobile penetration rates compared with the country's GDP, according to Andrawes Snobar, a senior research analyst at Arab Advisers Group.

"The growth in the Lebanese market is relatively low. The penetration level was not more than 31% by end of 2007," he says. "This - as the Arab Advisors Group believes - is mainly due to the fact that the current rates in Lebanon are not flexible nor does the country have any major price competition between the two operators.

"The known trend in the many countries in the Arab World of multiple line usage is minimal in Lebanon (not more than 3.5% of total subscribers use two or more lines). This is also due to the high rates in the country.

As chief commercial officer of Lebanese mobile player MTC Touch, Nadim Khater, is also convinced that more competition is needed in the Lebanese mobile sector. "The Lebanese mobile telecommunication sector is state-owned and this fact keeps the market withheld from its real potential, which will only be felt through liberalisation and proper competition," he says.

"This is confirmed by the Lebanese GSM penetration rate which is around 33% as opposed to other markets with a similar GDP and purchasing power where penetration has reached 80% or even 90%.

With Lebanon's low penetration rates, the proposed privatisation of the country's two mobile networks is likely to lead to a significant boom in the sector. "In case of privatisation, given the low penetration rate, the mobile market will definitely witness a boom in terms of growth and penetration rate," Khater says. "We believe mobile penetration in Lebanon should not be less than 80% in the coming five years under normal competition."

For Khater, the mobile telecommunication sector in Lebanon has the ability to attract major investment, which in turn will help to develop new business opportunities and uncover new sources of revenue. "In the case of privatisation, the market will drastically grow in terms of technology innovations, services and penetration rates," he says.

But plans to introduce competition were delayed after the Lebanese government postponed the auction of majority stakes in its two mobile phone companies from February 2008, to the summer of 2008, according to a report from Reuters.