France Telecom Mobile Liban

cancelled

Closed

France Telecom Mobile Liban (FTML) was awarded a 10 year build-operate-transfer (BOT) contract in August 1994, with a possibility of a two year extension. The license required the company to transfer 20% of its gross revenues to the Ministry of Post and Telecommunications during the first eight years of operations, 40% of its gross revenues for the last two years of operations, and if an optional 2 year extension is granted, 50% of gross revenues will be handed to MPT in years 11-12. The network would be transferred to the MPT at the end of the license period or MPT might possibly consider transforming the BOT contract into a proper license agreement. The company was created as a joint venture led by France Telecom Mobile Liban (67%), a subsidiary of France Telecom, and integrated by the local company Mikati (33%). The company started its commercial operations in January 1995. The initial network cost was US$30 million. Ericsson delivered the network equipment. The company granted a third contract in 1996 to Ericsson which generated an additional investment of $90 million in 1997. According to Ericsson, the network expansion will allow France Telecom to expand the GSM network in the Lebanon to service as many as 160,000 subscribers. The IFC provided financing of the amount US$ 75 million (US$ 20 million senior loan and a US$10 million subordinated loan from its own resources and a US$45 million syndication) in 1997. The company operations are carried by France Telecom Mobiles International, subsidiary of France Telecom. The company had 140,000 subscribers and covered 80% of the territory in 1998. FTML competed with LibanCell, which was granted a similar BOT contract in 1998. In 1997 a dispute ensued when the Lebanese state claimed that FTML and LibanCell had exceeded a 250,000 subscribers ceiling defined by the contract and demanded higher revenues for the government. The private companies countered the government's claim and argued that the 250,000 figure was not included in the contract, but rather in a Council of Ministers’ decision to grant the BOTs and that it was mentioned only in order to ensure that the operators would invest to expand the network if demand should reach such levels. A lengthy negotiation process ensued, in which FTML offered US$ 1.35 billion for a new 20-year license to replace their existing contract. The government, however, rejected the offer, instead demanding US$ 300 million in fines for the breach of the original contract and past tax arrears. The government officially canceled the contract in June 2001 and decided to tender a new 20-year license. FTML immediately initiated international arbitration alleging a breach of a Lebanese-French government agreement on investment protection. FTML continued to run the network while seeking international arbitration. With an original state take-over date of August 31, 2002, the company agreed that all revenues after August 2003 would go to the state but that the company would temporarily run the network until January 31, 2003. The company was compensated US$37 million for the temporary network management. The temporary management contract was extended in January 2003 whereby the company was paid US$15 million per month plus 70% of all network upgrade costs to run the network until the state finalized a new privatization of the network. The contracts were to be extended on a rolling basis while the respective political factions continued to fight over how to sell the two licenses at the policy level. In June 2004, MTC and Dutch firm Detecon replaced Liban Cell and Cellis after winning a four-year contract to manage Lebanon's two state-owned networks for 30 percent less than the amount charged by the outgoing operators. France Telecom eventually won a US$266 million arbitration decision, but the government disputed the ruling, claiming the French company owed the state US$300 million in unpaid fees.

Information and communication technology (ICT)

World Bank Group

Project

Commercial, Government, Telecommunications, Manufacturing (Industrial)