May 27, 2009 / 4:33 PM / 9 years ago

Loans for Palestinian mobile operator in doubt

JERUSALEM, May 27 (Reuters) - Western-backed loans to support the launch of a new Palestinian mobile phone operator are in jeopardy because Israel has yet to release needed radio frequencies, the company told Middle East Envoy Tony Blair.

In a letter to the former British prime minister obtained by Reuters on Wednesday, Wataniya Palestine said some $85 million in loans to help build the network could be “cancelled”. An arm of the World Bank said in a separate letter that it was concerned about the company’s ability to meet its obligations because of the withheld frequencies.

Wataniya Palestine appealed to Blair to intervene on behalf of the World Bank- and U.S.-supported project, asserting that future foreign direct investment in the Palestinian economy was at stake.

Israeli officials had no immediate comment.

Wataniya Palestine is owned by Kuwait’s National Mobile Telecommunications Co. (Wataniya) NMTC.KW, a unit of Qatar Telecommunications Co. (Qtel) QTEL.QA, as well as a holding company for Palestinian public assets.

Earlier this year, Wataniya Palestine secured the $85 million loan package. One of the major lenders was the International Finance Corporation (IFC), the World Bank’s private sector arm.

International financial support for Wataniya Palestine was touted as a vote of confidence in developing the economy of the Israeli-occupied West Bank, where Palestinian President Mahmoud Abbas’s Western-backed government is based. Abbas supports peace talks with Israel.

“We would like to express our concern about the delay in the allocation of the frequencies and in the launch of commercial operations, as these could adversely impact the realisation of the agreed business plan,” Mohsen Khalil, IFC director for global information and communication technologies, wrote in a May 15 letter to Wataniya Palestine.

Khalil added that “failure” to obtain the frequencies and to roll out the network “could potentially have a material adverse effect on the company’s ability to meet its obligations under the finance documents”.

Blair has long pressed Israel to grant Wataniya Palestine the promised frequencies.

The company aims to challenge a monopoly long held by Palestine Telecommunications Co. (PalTel). Mobile Telecommunications Co. (ZAIN.KW) (Zain), Kuwait’s largest mobile operator, took a majority stake in PalTel earlier this month.

    “This delay now jeopardises the entire second mobile operator project in Palestine,” Wataniya Palestine’s chief financial officer, Brent Muckridge, wrote to Blair on Tuesday.

    Citing the IFC letter, Muckridge said: “If Wataniya did not receive the necessary frequencies as soon as possible, the IFC would see this as a material adverse effect, which would cause the US$85 million loan to be cancelled”.

    “Failure of this project would not only mean a loss of jobs, tax revenues for the Palestinian Authority but also impact the local banking sector, as they are the largest lenders to Wataniya. This will ultimately have an impact on future and to some degree on current foreign direct investments in Palestine,” Muckridge wrote.

    Israel and Abbas’s government signed an agreement last year to release the frequencies. But Wataniya Palestine said it has yet to receive all of them, delaying the launch of commercial services in the West Bank, which was scheduled for April.

    The company said it aims to begin those operations by the end of July, but Western officials said it was uncertain.

    In addition to support from the World Bank, the U.S. government's Overseas Private Investment Corporation provided loan guarantees for the Wataniya Palestine project under a programme created to help small- to mid-sized businesses. (Reporting by Adam Entous; Editing by David Cowell) (For blogs and links on Israeli politics and other Israeli and Palestinian news, go to blogs.reuters.com/axismundi)

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