Mobile operator demands apology from former minister

5 Oct 2005

Lebanon’s former Telecoms Minister has launched a scathing attack on previous cellular network operator LibanCell, claiming that it owes the state USD300 million for breaching a build-transfer-operate (BTO) agreement. Issam Naaman claims that LibanCell breached its contract by signing up double the 125,000 subscriber limit imposed in the agreement. LibanCell has strongly rejected the claims and says it has already been reprieved from paying any such penalties by an International Arbitration Commission. It has now called on Naaman to apologise.

Both LibanCell and France Télécom Mobile Liban signed BTO agreements to operate GSM-900 services with the government in 1994. Under the terms of the BTO contracts they were compelled to pay 20% of revenues to the state for the first eight years and 40% for the remaining two. The ten-year agreements were extendable for a further two years, during which time the government would be entitled to claim 50% of turnover.

In 2000 the two asked the government if they could pay USD1.35 billion each to convert their BTO contracts into full GSM licences, but the state rejected the offer, and in June 2001 accused them of violating the terms of their BTO agreements and terminated their contracts, revealing plans to resell the networks to two new licensees. The operators contested the decision, appealing to the International Chamber of Commerce in Paris, but in 2002 a new Telecommunications Act was passed, empowering the government to terminate the BTO agreements on 31 August 2002. The Act did, however, set out guidelines for the companies to be properly compensated for the premature end to their contracts, and they were offered compensation of USD178 million in return for handing over their network assets. After much negotiation the pair eventually handed control back to the state in mid-2003. Kuwait-based mobile operator MTC and Deutsche Telekom-owned consultancy DeTeCon won the contracts to manage the two networks in April 2004.