The rift between President Emile Lahoud and Prime Minister Rafik Hariri over the telecom issue widened after the Telecommunications Ministry announced Wednesday that it would take over LibanCell and Cellis through a third party if the government failed to get adequate bids on the licenses.
In a statement issued to the press, Telecommunications Minister Jean-Louis Qordahi said that a third option should be considered if the scheduled auction and tender produced unacceptable results.
Hariri has repeatedly rejected any plan endorsing a take-over of the current cellular firms by a third party in the event that the government does not receive a good offer for the two 20-year licenses.
The prime minister believes the task of running the cellular firms should not fall on the government even if the auction fails.
But Qordahi denied accusations that the government’s aim is to nationalize the two cellular firms in the event that the auction flops.
He contended that the Telecommunications Ministry is acting within its rights granted by its contracts with Cellis and LibanCell, which gives the government the power to terminate the contract unilaterally.
“The contract is build-operate-transfer (BOT) not ownership based, and requires that the two companies turn over the networks to the state immediately after the termination of the contract,” the statement said.
Cellis and LibanCell each have a 10-year build-operate-transfer (BOT) contract with the government.
The statement added that “any talk of ‘seizure’ or ‘nationalization’ is inappropriate.”
Hariri hopes to generate between $1.5 billion and $2 billion from the licenses in order to reduce the $28.8 billion public debt and send a strong signal to the international community that Lebanon is serious about reforming its finances.
Qordahi, who is supported by Lahoud, said that the assets of the two cellular operators should return to the government and that teams from the ministry should have full access to the equipment of Cellis and LibanCell.
The statement said that the ministry is complying with the recommendations of the investment bank, HSBC, which was appointed by the government to launch a tender and an auction.
It added that the ministry has the right to assume control of the operators’ equipment even before paying the compensation to these companies for terminating their contracts three years before their expiry.
The international consultant firm KPMG has set $340 million as compensation for the two companies, but the government is also demanding $600 million from both companies for allegedly violating the contracts.
Both the government and the cellular operators have sought international arbitration to settle their dispute.
Both companies reported a total of more than $110 million in net profits in 2001.
The government collects 20 percent of the gross revenues of the companies in addition to 15 percent of their net profits.
But some of Lahoud’s supporters claim that Cellis and LibanCell have not declared their true profits.
One economist said that if the third company appointed by the government runs the current mobile firms for a limited time, the Telecommunications Ministry can generate a gross revenue of more than $700 million a year in place of the $300 million it collects now.
Sources close to the government fear that Lebanon will suffer a formidable setback if the privatization of the telecom sector does not take place this year, adding that Lebanon’s reputation is at stake.
“If the government fails to generate money from privatization before the end of this year, Lebanon will not get a penny from the donor states,” one economist warned.
Hariri hopes that if France and other states discern progress in reducing the public debt, a “Paris II” donor conference may be convened before the end of the year.
For his part, Qordahi insisted that the Telecommunication Ministry’s Aug. 31 deadline for the termination of the contract with the mobile companies is not up for negotiation.

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