Liban-Cell

cancelled

LibanCell was awarded a 10 year build-operate-transfer (BOT) contract in August 1994, with a possibility of a two year extension. The contract required the company to transfer 20% of its annual gross revenues to the Ministry of Post and Telecommunications (MPT) during its first eight years of operations and 40% of its gross revenues for the last two years of operations. If an optional two year extension is granted, 50% of gross revenues will be handed to MPT in years 11-12. The network would be transferred to MPT at the end of the license period or MPT might consider transforming the BOT contract into a proper license agreement. LibanCell was created in 1994 by a group of local companies, Telecom Finland (14%), and SB Telecom lead by Samawi Brothers. The commercial services were launched in April 1995. LibanCell cellular covered about 95 percent of Lebanese territory and had more than 304,000 subscribers by 1999. The initial network was delivered by Motorola for US$20 million. Motorola designed, installed and integrated the GSM cellular network based on radio technology from Motorola and D900 technology from Siemens. The company has competed with FTML, which was awarded a similar BOT contract, since 1994. 2001 saw the canceling of the operating license by the Lebanese government over a legal dispute alleging violations of the BOT contract. In 2000, LibanCell offered the government US$1.35 billion to transform their BOT contracts into operating licenses. The government rejected those bids preferring to pursue a claim on back taxes and fines it said the company owed for allegedly exceeding their subscription quota. The company denied infringing on their contract terms and refused to pay. The company continued to run the networks while seeking international arbitration. In July 2002 Sonera sold its 14% holding in the Lebanese GSM operator LibanCell to Lebanese Telecommunications Company S.A.L for US$22.5 million. With an original state take-over date of August 31, 2002, LibanCell 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 LibanCell 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. 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. 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, both of which enjoyed close ties to prominent local politicians. Consumers have been expecting a drop in prices and increased competition, although the government which holds a monopoly over all telecommunications revenues, has yet to announce any plans for lowering tariffs.