Alfa

concluded

Closed

In April of 2004, German firm Detecon International, an affiliate of the Deutsch Telekom group, won the bidding for a four-year management contract for one of Lebanon's two mobile companies by the Lebanese cabinet. Detecon submitted the lowest offer for management of both the Cellis and LibanCell networks. It was, therefore, asked to select which network it would like to run. Detecon decided to select the Cellis network to manage (which was considered the more valuable of the two), meaning that the former Cellis network owner, Orange (France Telecom), was pushed out of the Lebanese market after it submitted the second-lowest bid for the network. The government was to effectively pay Detecon US$201,316,292, or US$4.1 million per month, to manage the former Cellis network for the 48 month period, beginning in June of 2004. The government in 2001 canceled the licenses of the country's two cell phone operators, Cellis and Libancell, in a dispute over demands that the companies pay hundreds of millions of dollars in back taxes and fines for allegedly exceeding their quotas of 400,000 lines each. The government, however, asked the companies to continue managing the companies for a fee. But the government complained that Cellis and Libancell charged too much for operating the networks and hoped to save money by auctioning them off to foreign firms. In fact, the winning bids, including Kuwait's MTC which was to manage the former Libancell, were both about 30% less than the management fees charged by the two previous companies. Detecon inherited about 440,000 subscribers. The network formerly known as Cellis was replaced by the brand name "Alfa." Clic, the prepaid Cellis card, was replaced by Alfa Active, which had accounted for 70% of the Cellis's customer base. The government was generating US$49 million a month from both networks, a revenue representing 20% of the total income of the state. This made it unlikely that the tariff rates, among the highest in the region, were to be reduced, fueling a series of attempted day-long cellular boycotts among subscribers in 2004. The government decided to offer the management contracts to tender after receiving a poor response for the sale of two licences to operate the networks for 20 years.

Lebanon

World Bank Group

Project

Consumer Products, Government, Telecommunications, Manufacturing (Industrial)