September 24, 2013 / 2:55 PM / in 4 years

Zain's Lebanon telecom contract to be rolled over again -CEO

DUBAI, Sept 24 (Reuters) - Zain expects its contract to run Lebanon’s main mobile operator to be rolled over until Lebanon forms a new government which can authorise tenders new contracts, the Kuwaiti firm’s chief executive told Reuters.

Lebanon’s prime minister designate Tammam Salam has been trying to form a government for nearly six months, but political divisions have prevented formation of a cabinet and there is no sign of a breakthrough.

The stalemate has delayed plans to revamp the largely state-held telecom sector.

“There’s an interim government - nobody wants to make a decision on a long-term contract,” Scott Gegenheimer, Zain chief executive told Reuters. “I think it will keep getting rolled over until you get a final government in place.”

Government-owned Ogero Telecom maintains the fixed network in Lebanon and the state owns the two mobile operators, Touch and Alfa, which Zain and Egypt’s OTMT manage respectively.

Zain took control of Touch in 2004 and OTMT of Alfa in 2009, and their management contracts have repeatedly been renewed since then, usually on an annual basis.

Both were due to expire on Jan. 31, but were extended to June 30 to allow more time for a tender for new 3-5 year contracts, which would have been open to other operators.

Bidding had been due to open in mid-April, but was halted, with the management contracts instead renewed until Sept. 30.

Zain and OTMT have yet to hear if their contracts will be rolled over again, less than a week before they expire.

Touch and Alfa’s combined revenue for 2011 was $1.6 billion, of which $1.4 billion went to the government, Business Monitor International estimated, making telecoms the second-largest contributor to state coffers after taxes on goods and services.

Touch is the market leader, with a 53 percent share of Lebanon’s mobile phone subscribers.

“What will happen at the end of the month we’ve still not discussed with the government,” Marwan Hayek, Alfa Telecom chairman and chief executive told Reuters.

Hayek said he had no idea if an extension would be for a further three months.

Mobile phone penetration in Lebanon was 91 percent in 2012, lagging much of the Middle East, where rates in many countries are above 100 percent as customers own multiple accounts.

The government cut broadband Internet subscription fees by more than three-quarters in 2011, but they remain high for the region.

Hayek said Alfa had nearly 1 million data customers, up from 100,000 in 2011. Data, including text messages, provides about a quarter of revenue, He said it would keep growing but did not give any estimate of how much. (Reporting by Matt Smith. Editing by Jane Merriman)

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