Monday 15, 2007

Kamal Shehadi

The Case for Liberalizing Telecommunications in Lebanon

“Paris III and the Post War Landscape: Lebanon’s Economic Policy Imperatives”

Lebanon remains far behind its neighbors in terms of telecommunications liberalization

Comparison of Telecom Market in Key Arab Markets (2000-2006)

Notes: M = Monopoly; D = Duopoly; C = Competition; PC=Partial Competition

Sources: ITU Trends in Telecommunication 2001, 2006

CountryCountry Incumbent OperatorIncumbent Operator

Lo

ca

lV

oic

eL

oc

al

Vo

ice

Intl

V

oic

eIn

tl

Vo

ice

Mo

bil

eM

ob

ile

Da

taD

ata

Lo

ca

lV

oic

eL

oc

al

Vo

ice

Intl

V

oic

eIn

tl

Vo

ice

Mo

bil

eM

ob

ile

Da

taD

ata

Date of Opening of Last Market

Segment

Date of Opening of Last Market

Segment

CommentsComments

AlgeriaAlgeria Algerie Telecom (2003)

Algerie Telecom (2003) MM MM MM MM DD DD CC DD 20052005 Market entry still highly

regulatedMarket entry still highly regulated

EgyptEgypt Telecom Egypt (1998)

Telecom Egypt (1998) MM MM DD MM MM CC

D C

D C CC

20062006Third mobile and 2 international gateway licenses

Third mobile and 2 international gateway licenses

JordanJordan Jordan Telecom Company (1997)Jordan Telecom Company (1997) MM MM PCPC CC CC CC CC CC 20052005 Open licensing regime since

January 2005Open licensing regime since January 2005

MoroccoMorocco Maroc Telecom (1996)

Maroc Telecom (1996) MM MM CC CC CC CC DD CC 20052005 Market entry still highly

regulatedMarket entry still highly regulated

BahrainBahrain Batelco (1981)Batelco (1981) MM MM MM MM CC CC PP CC 20042004 Open licensing regime since January 2005Open licensing regime since January 2005

Saudi ArabiaSaudi Arabia Saudi Telecom Company (1998) Saudi Telecom

Company (1998) MM MM MM MMM D

M D

CC CC CC 20072007 Fixed and mobile licenses to be issued in 2007Fixed and mobile licenses to be issued in 2007

OmanOman OmanTel (2001) OmanTel (2001) MM MM MM MM DD DDD C

D C CC

2006-20072006-2007Fixed and data network licenses to be issued in 2007

Fixed and data network licenses to be issued in 2007

LebanonLebanonMinistry/Ogero

Not corporatized

Ministry/Ogero

Not corporatizedMM MM DD CC MM MM DD PCPC TBDTBD

Liberalization expected with the implementation of Law 431/2002

Liberalization expected with the implementation of Law 431/2002

2000 2006

As a result, its telecom is underdeveloped when compared to international benchmarks and there is a high pent-up demand for services

Bahrain

Jordan

Morocco

Tunisia

United Arab Emirates

Egypt

Algeria

Venezuela

Romania

Chile

South Africa

Poland

Bulgaria

Slovakia

Hungary

Singapore

Ireland

Italy

Libya

LEBANON

y = 0.3441Ln(x) - 2.1968R2 = 0.6852

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

0 10,000 20,000 30,000 40,000 50,000 60,000

Fixed Line Penetration vs. GDP per Capita (2005)

PS

TN

Pen

etra

tion

GDP per Capita (USD/ Year)

LEBANONLibya

Italy

Czech Republic

IrelandSingaporeHungary

SlovakiaBulgaria

PolandSouth AfricaChile

Romania

Venezuela

Saudi Arabia

Algeria

Egypt

United Arab Emirates

Tunisia

Morocco

Jordan

Bahrain

Russia

Qatar

Kuw ait

y = 0.2162Ln(x) - 1.1851R2 = 0.7209

0%

20%

40%

60%

80%

100%

120%

140%

0 10,000 20,000 30,000 40,000 50,000 60,000

Mobile Penetration vs. GDP per Capita (2005)

Mob

ile P

enet

ratio

n

Libya

US

Germany

Spain

UK

ItalyFrance

Egypt

UAE

Qatar

KSA

Bahrain

LEBANON

Jordan

Venezuela

Saudi Arabia

PeruEgypt

Algeriay = 0.1165Ln(x) - 0.689

R2 = 0.483

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 10,000 20,000 30,000 40,000 50,000

Internet Penetration vs. GDP per Capita (2005)

Inte

rnet

Pen

etra

tion

GDP per Capita (USD/ Year)

Sources: Economist Intelligence Unit, interviews with industry

GDP per Capita (USD/ Year)

Lebanese Telecommunications Performance

The cost of a mobile postpaid minute in Lebanon is among the highest in the region due to the lack of competition and a high excise tax

Mobile Postpaid Peak On-net Minute Rates (2006) (US$ cents per peak minute)

Note: All Rates corresponds to the lowest first minute rate

8

8

8

7

6

4

6

13

13MTC touch

Alfa

Etisalat

STC

MobileCom

Fastlink

Batelco

Mobinil

Umniah

38

36

17

14

12

8

8

8

7

MTC Touch

Alfa

STC

Fastlink

Batelco

Umniah

MobileCom

Etisalat

Mobinil

Mobile Prepaid Peak On-net Minute Rates (2006) (US$ per peak minute)

More than double the lowest regional

rate

60% higher than the lowest regional

rate

Telecommunications has suffered from slow mobile penetration growth…

Sources: AAG, 2006 data from OSB (till November), CIA, ITU, Ministry of Telecommunications* Up to October 2006

Mobile Penetration Evolution in Lebanon

Mobile Penetration Evolution in Lebanon (2000 - 2006)

22.8 22.7 23.4 22.924.8 24.9

27.5

0

200

400

600

800

1000

1200

2000 2001 2002 2003 2004 2005 2006*

Year

Su

bs

cri

be

rs (

Th

ou

sa

nd

s)

0

5

10

15

20

25

30

Pe

ne

tra

tio

n R

ate

Subscribers Penetration

+8%

+10%

CAGR+0.4%

… which has been stunted compared to the rest of the region …

Sources: ITU, AAG, OSB

CAGR of Mobile Penetration

Mobile Penetration CAGR in the MENA Region Between 2000 and 2005

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

Leba

non

Egypt

Mor

occo

Algeria

Oman

Jord

anKSA

UAE

Tunisi

a

Qatar

Bahra

in

Kuwai

t

CA

GR

… particularly over the last few years

Sources: ITU, AAG, OSB

Mobile Penetration Evolution in the MENA Region

Mobile Penetration Evolution in the MENA Region

0

20

40

60

80

100

120

1994

1996

1998

2000

2002

2004

2006

Year

Pe

ne

tra

tio

n R

ate

Algeria Bahrain Egypt Jordan KSA Kuwait

Lebanon Morocco Oman Qatar Tunisia UAE

Lebanon

Lebanon lags behind in broadband technology and penetration

ADSL Penetration Rates in 2005

1110

8

10

Asia Pacific(OECD)

Europe(OECD)

Americas(OECD)

MENA Avg Leb

xD

SL

Pe

ne

tra

tio

n R

ate

Type of Broadband Connection in OECD Countries (2005)

Other, 8

Cable, 29

xDSL, 63

xDSL technologies (Wireline broadband technologies) are the most commonly used

infrastructure to deliver broadband services in OECD countries

xDSL technologies (Wireline broadband technologies) are the most commonly used

infrastructure to deliver broadband services in OECD countries

Lebanon lags behind MENA and OECD countries in the introduction of xDSL

Lebanon lags behind MENA and OECD countries in the introduction of xDSL

ADSL in Lebanon

Sources: ITU, OECD

Governments have pursued a number of objectives when embarking on telecommunications liberalization

Keep up with technological advances Introduce good governance and management Ensure more effective infrastructure Improve sector productivity Improve financial performance Increase overall telecom revenues Attract private and foreign capital Improve connectivity and penetration of ICT

Spur job creation throughout the economy Generate revenues from licenses Generate revenues from privatization Join international trade organizations (e.g. WTO) Join the global trading system (e.g. EU association) Catalyze growth of information economy Improve global competitiveness of the economy Improve general economic performance

Increase service penetration Increase customer choice Improve price to quality ratio Introduce new technologies and services Reach underserved areas

Attract InvestmentsAttract Investments

Networked ReadinessNetworked Readiness

Economic DiversificationEconomic Diversification

Trade IntegrationTrade Integration

Customer Oriented

Sector Oriented

Economy Wide

Liberalization Objectives

Increase Customer Choice

Increase Customer Choice

Increase Penetration Increase Penetration 11

Efficient IndustryEfficient Industry33

Job CreationJob Creation44

Ob

jec

tiv

es

of

Te

lec

om

L

ibe

rali

zati

on

Lower TariffsLower Tariffs22

Liberalization will improve penetration and decrease telecommunications tariffs

Sources: Tarifica, Operators, Booz Allen and Hamilton, Global Investment House, World Bank

In Jordan, a country with comparable population and size but much lower per capita income, liberalization and licensing of new mobile operators met with jumps in mobile penetration. Real benefits were realized after the introduction of the third and fourth mobile operators

Impact of Telecom Liberalization on Penetration and on Prices

Mobile Penetration in Jordan

0

10

20

30

40

50

60

70

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Year

Pe

ne

tra

tio

n R

ate

Fa

stlin

k

Mo

bile

com

Xp

ress Um

nia

h

0

20

40

60

80

100

120

y-3 y-2 y-1 y 0 y+1 y+2

Batelco STC Fastlink Qtel

Prices start decreasing prior to competition in a move to prepare for the entry of a new operatorAs a result of competition prices tend to continue decreasing after liberalization unless capped by the regulator

Year competition introduced in

concerned markets, 2004 for Qtel

Evolution of Lowest Mobile Peak Minute Rate 22

Evolution of Mobile Penetration In Jordan 11

Liberalization improves enterprise performance throughout the economy and drives higher employment in telecommunications

Sources: Petrazzini, World Bank

Impact of Telecom Liberalization on the Industry and on Employment

Enterprise employment growth

1.2%

Sales growth 3.4%

Profitability 5.1%

Investment rate 2.5%

Re-Investment rate 6.0%

Total factor productivity 1.0%

Worldwide, telecom liberalization has positively impacted sector performance and the penetration of key services. A 2006 World Bank study demonstrates how greater ICT use in enterprises results in and improvement of performance

Effect of Liberalization on Industry 33 Effect of Liberalization on Employment

44

1990 1992 1993 1994199190

120

110

100

Competitive Markets

Monopoly Markets

Employment (normalized)Index 1990 = 100

A comparative analysis of 26 countries in Asia and Latin America between 1990 and 1994 shows that employment in competitive markets increased by 20.73% while employment in other markets grew by only 3.13%

There are a number of issues that will shape Lebanon’s liberalization

Key Issues Shaping Lebanon’s Liberalization Strategy

Exclusivity and Additional Licenses

Exclusivity and Additional Licenses

Government Ownership

Government Ownership

Revenue Sharing

Revenue Sharing

How will granting an exclusive international license impact the fixed and data markets When should a 3rd mobile license be issued? How will the timing impact performance? The

economy? The financial performance of existing operators?

How will granting an exclusive international license impact the fixed and data markets When should a 3rd mobile license be issued? How will the timing impact performance? The

economy? The financial performance of existing operators?

How much of a stake will the government maintain in telecom operators? How will cross ownership management issues be resolved, particularly with the

government’s ownership of all operators today? What will the impact be on performance and investment?

How much of a stake will the government maintain in telecom operators? How will cross ownership management issues be resolved, particularly with the

government’s ownership of all operators today? What will the impact be on performance and investment?

Is the argument for high revenue sharing still valid considering today’s telecommunications landscape?

Is the argument for high revenue sharing still valid considering today’s telecommunications landscape?

Type of Competition

Type of Competition

What type of competition is the most apposite to the development of the mobile and fixed market in Lebanon? Service-Based or Facilities-Based Competition?

What is the impact of each type of competition on the telecommunication market? What lessons could be drawn from other countries?

What type of competition is the most apposite to the development of the mobile and fixed market in Lebanon? Service-Based or Facilities-Based Competition?

What is the impact of each type of competition on the telecommunication market? What lessons could be drawn from other countries?

Some governments have been lured by the false promise of exclusivities

Exclusivity PeriodsExclusivity Periods

In order to attract greater investment, liberalizers (particularly in the MENA region) offered telecom operators exclusivity periods

This was balanced with exclusivity terms that required high quality of service and rollout

Both Jordan and Egypt offered their fixed line operators exclusivity resulting in delayed competition and greater incumbent dominance in the market

Exclusivities have detrimental effects on network growth and performance (up to 40% less coverage), despite the increased valuation of such operators

It is for this reason that many Latin American countries such as Chile, Bolivia and Brazil, have chosen not to give privatized operators any exclusivity periods

Lebanon is embarking so late in the game that exclusivities will be difficult to justify on economic or even financial grounds

In order to attract greater investment, liberalizers (particularly in the MENA region) offered telecom operators exclusivity periods

This was balanced with exclusivity terms that required high quality of service and rollout

Both Jordan and Egypt offered their fixed line operators exclusivity resulting in delayed competition and greater incumbent dominance in the market

Exclusivities have detrimental effects on network growth and performance (up to 40% less coverage), despite the increased valuation of such operators

It is for this reason that many Latin American countries such as Chile, Bolivia and Brazil, have chosen not to give privatized operators any exclusivity periods

Lebanon is embarking so late in the game that exclusivities will be difficult to justify on economic or even financial grounds

Potential of Exclusivity PeriodsPotential of Exclusivity Periods

Exclusivity Competition

Price of Privatized Telecom Operator

50%

Exclusivity Competition

40%

Impact of Exclusivity Periods

Source: Wallsten, 2000

Telecommunications Performance

The launch of a third mobile license has, traditionally, increased mobile penetration by an average of 32 % within two years

Source: GSM World, ITU, Connexus Analysis

Increment in Mobile Penetration Upon Introduction of the Third Mobile License in Europe (Y-1/Y+1)

0

10

20

30

40

50

Incr

em

ent

in P

enetr

atio

n

Average = 31.5 %

The average incremental growth in mobile penetration witnessed in Europe upon introduction of the third mobile license was 32%; In the Lebanese context, this is translated into a doubling of penetration to 60% in the span of two years

The average incremental growth in mobile penetration witnessed in Europe upon introduction of the third mobile license was 32%; In the Lebanese context, this is translated into a doubling of penetration to 60% in the span of two years

Estimation of Mobile Penetration in Lebanon after Introduction of a Third Mobile License

0

10

20

30

40

50

60

70

0 1 2 3 4 5

EU Y+1

EU Y-1Leb Y-1

Leb Y+1

Timing and Impact of a Third Mobile License

Late liberalizers, such as Lebanon, should be able to complete their liberalization in a relatively short time frame taking advantage of the accumulated international experience in liberalization

Liberalization Path

Timing of Third Mobile License

In a properly regulated market, the award of a third mobile license marks the beginning of effective competition and therefore liberalization

Empirical analysis shows that late liberalizers have introduced competition in a short time frame; Bahrain was able to complete its liberalization process in less than two years

Lebanon must, therefore, consider the possibility of further mobile licensing in the near future to ensure real and effective competition

In a properly regulated market, the award of a third mobile license marks the beginning of effective competition and therefore liberalization

Empirical analysis shows that late liberalizers have introduced competition in a short time frame; Bahrain was able to complete its liberalization process in less than two years

Lebanon must, therefore, consider the possibility of further mobile licensing in the near future to ensure real and effective competition

Bahrain

AlgeriaJordan

Saudi ArabiaPeruBrazilSingapore

TunisiaEgypt

MoroccoHungary

Chile

MalaysiaKorea

0

2

4

6

8

10

12

14

16

1980 1985 1990 1995 2000 2005

Date of LiberalizationD

ura

tio

n o

f L

ibe

raliz

ati

on

Timing of Telecom Liberalization

Sources: Connexus Analysis, ITU

8181 …… 8888 8989 9090 9191 9292 9393 9494 9595 9696 9797 9898 9999 0000 0101 0202 0303 0404 0505 0606 LegendLegend

KoreaKorea

ArgentinaArgentina

MexicoMexico

HungaryHungary

PeruPeru

SingaporeSingapore

BrazilBrazil

EgyptEgypt

MoroccoMorocco

JordanJordan

AlgeriaAlgeria

Saudi ArabiaSaudi Arabia

BahrainBahrain

It became common among best regulatory practices to include international gateways among licensed mobile services

The general trend is moving towards liberalizing all services within a shorter span of time In late liberalizers, the trend is to start with the early liberalization of mobile, followed by data then fixed Mobile licenses are no longer being granted without international licenses (except in the case of Egypt), although in some cases, the mobile licensee had to wait one or two years before providing international services

The general trend is moving towards liberalizing all services within a shorter span of time In late liberalizers, the trend is to start with the early liberalization of mobile, followed by data then fixed Mobile licenses are no longer being granted without international licenses (except in the case of Egypt), although in some cases, the mobile licensee had to wait one or two years before providing international services

Sources: Regulator Websites, ITU

Mobile

International

Fixed

Data Only

Licenses granted together,

however the SP had to wait

before providing international

services

Liberalization Sequencing

Chile

Based on international benchmarks, the impact of swift liberalization on service penetration is indisputable

Impact of Competition and Liberalization on Penetration

Source: ITU, Global Investment House, World Bank

Mobile Penetration in Jordan

0

10

20

30

40

50

60

70

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Year

Pen

etra

tio

n R

ate

Sta

rt o

f Li

bera

lizat

ion

Ful

l Li

bera

lizat

ion

Mobile Penetration in France

01020304050607080

1990

1992

1994

1996

1998

2000

2002

2004

Year

Pen

etra

tio

n R

ate

Sta

rt o

f Li

bera

lizat

ion

Ful

l Li

bera

lizat

ion

ADSL Subscribers in Jordan

0

10000

20000

30000

40000

50000

60000

Q4

2003

Q1

2004

Q2

2004

Q3

2004

Q4

2004

Q1

2005

Q2

2005

Q3

2005

Q4

2005

Q1

2006

Su

bsc

rib

ers

Ful

l Fix

ed

Libe

raliz

atio

n

Mobile Penetration in Morocco

05

1015202530354045

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Year

Pen

etra

tio

n R

ate

Sta

rt o

f Li

bera

lizat

ion

The benefits of competition can be reached through a combination of facilities-based and service-based competition

Types of Competition Introduced in Liberalization

Facilities- Based CompetitionFacilities- Based Competition Service-Based CompetitionService-Based Competition

Encouraging Facilities Based Competition:

Licensing Facilities Based Operators (Mobile and Fixed Operators)

Encouraging Investment

Promoting private sector participation

Providing incentives for deploying heavy infrastructure requiring massive investments

Adopting technology neutrality

Encouraging Service Based Competition:

Licensing Mobile Virtual Operators and Service Based Operators (Mobile and Fixed)

Encouraging wholesale services

Mandating and regulating Local Loop Unbundling

Mandating and regulating wholesale access, interconnection by incumbent operators

Competition in telecommunications is achieved through:

Competition in telecommunications is achieved through:

Facilities-based operators (FBO) deploy telecommunication networks, systems and facilities, to offer telecom services to third parties, which may include other licensed telecommunication operators, business customers or the general public

Facilities-based operators (FBO) deploy telecommunication networks, systems and facilities, to offer telecom services to third parties, which may include other licensed telecommunication operators, business customers or the general public

Service-based operators (SBO) lease telecommunication network elements (such as transmission capacity and switching services) from facilities-based operators, or to resell the telecommunication services of FBOs, to third parties

Service-based operators (SBO) lease telecommunication network elements (such as transmission capacity and switching services) from facilities-based operators, or to resell the telecommunication services of FBOs, to third parties

19

Service based operators have typically led to more competition (as measured by market concentration) and lower prices for end-users

Impact of Service Based Competition on Market Dynamics

*A wave of consolidation in the Finnish market in 2005 resulted in major MVNOs being acquired by MNOs+The Herfindahl-Hirschmann Index provides an indication of the development of competition in the mobile markets. Usually, 0.18 is considered the threshold for "effective competition"Source : Regulators’ market reports

0

5

10

15

20

25

30

1994 1999 2004Nu

mb

er

of M

ob

ile O

pe

rato

rs

Denmark Finland Norway Sweden

0

5

10

15

20

25

30

1998 2000 2002 2004 2006

Ma

rke

t Sh

are

of S

erv

ice

B

ase

d M

Os

(%)

Denmark Finland* Norway Sweden

00.10.20.30.40.50.60.7

1998 2000 2002 2004 2006Ma

rke

t Co

nce

ntr

atio

n (

HH

I)+

Denmark Finland Norway Sweden

0100200300400500600700

Jan-02 May-03 Sep-04 Feb-06

An

nu

al C

ost

of T

ypic

al M

ob

ile

Usa

ge

(E

uro

s)

Denmark Finland Norway Sweden EU

Government ownership in general has a detrimental effect on telecommunications investment…

Impact of Government Ownership on Investment in the Telecom Sector

60

80

100

120

140

160

2000 2001 2002 2003 2004

Inv

es

tme

nt

in t

he

Te

lec

om

Se

cto

r (U

SD

pe

r S

ub

sc

rib

er)

Government Ownership < 2.0% Government Ownership > 30%

Source: ITU 2005. Countries Studied: Denmark, Italy, Korea, Spain, UK, Portugal, Australia, Morocco, Bahrain, Greece, Germany, Jordan, France

Impact of Government Ownership on Investment

… It also tends to result in decreased efficiency

Source: Annual Reports 2003; Arab Advisors Reports, “Telecom Management & Policy Program, University of San Francisco report, Regulation and State Ownership”, Johannes Bauer, Michigan State University, February 2005

Impact of Government Ownership on Efficiency

128149

122

252278

324357

Q-Tel Etisalat Batelco JordanTelecom

FranceTelecom

TelecomItalia

Telefonica

“Normalized” Total Lines per Employees – Selected Operators (2003)

Average 230

High Gov Ownership

Average = 139

Moderate Gov Ownership

Average = 217

No Gov Ownership

Average = 340

There has been a trend, even in the region, to minimize government cross-ownership of telecom operators, except in countries that have not committed to liberalization (e.g., Kuwait and the UAE)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Sabafon (Yemen)

Spacetel (Yemen)

UAE (du)

Tunisiana (Tunis)

Syriatel* (Syria)

Areeba* (Syria)

Mobily (Saudi Arabia)

Nawras (Oman)

Meditel (Morocco)

Alfa (Lebanon)

MTC Touch (Lebanon)

Wataniya (Kuwait)

MTC Vodafone (Kuwait)

Xpress (Jordan)

Fastlink (Jordan)

Vodafone (Egypt)

MTC Vodafone (Bahrain)

Wataniya (Algeria)

OTA Djezzy (Algeria)

Government Public Institutional Investors Private Sector Foreign

Total Gov’t

Ownership

Ownership Comparison of Non-incumbent Mobile Operatorsin Arab Countries

(*) Both Syrian Operators are operating on a BOT contract. At the end of the agreement, ownership of the network goes back to the government Source: EMC World Cellular Database; Zawya; Arab Advisors Group; Operators

---

12%--

25%24%

100%100%

8%-

15%---

40%--

Cross Ownership

High royalties rates were a tool to offset the unpredictability of the telecom market. Today, they negatively impact growth…

Impact of Royalties on Growth

12.011.8

11.711.5

11.311.0

10.7

0 5 10 15 20 25 30

Profit Share (%)

Imp

lied

Su

sta

ina

ble

Gro

wth

R

ate

ILLUSTRATIVE

ILLUSTRATIVE

Impact of Royalties

The above chart illustrates the impact of royalties on a company’s sustainable growth rate, assuming no new investment is made in the company. In the given year, the company is assumed to make USD 5 Billion in profit, USD 1 Billion of which are dividends. Return on Equity is 15%

Connexus Consulting Analysis

… and discourage investment in the sector

Impact of Royalties

In Ireland, lower tax rates have contributed to attracting investment to the telecom sector. The above graph shows investment in telecom per capita in Ireland as a % of investment in telecom per capita in the OECD as tax rates decreased

Irish Development Agency Report, ITU

Impact of Increased Corporate Tax Rates on Telecom Investment in Ireland

10%

15%

20%

25%

30%

1999 2000 2001 2002 2003 2004 2005

50%60%70%80%90%100%110%120%130%140%

Corporation Tax Rate Relative Investment in Telecom per Capita

Conclusions On Liberalization

No or limited exclusivities granted Launch of additional mobile licenses

Prepare for facilities-based and service-based competition

No revenues sharing in competitive market segments

Divestment of government ownership from the exiting mobile businesses Maintain government stake in Liban Telecom after restructuring and privatizing Prohibition of any form of cross ownership between telecommunications operators whether public

or private

22

11

33

44