BEIRUT -- Lebanon's government postponed the auction of two mobile-phone companies, at which it hoped to raise $7 billion, because of a political stalemate over the election of a president, said Minister of Telecommunications Marwan Hamadeh.

``We had committed ourselves to this February, but we will not take a decision before a new president and a new government takes over,'' Hamadeh said in an interview from Beirut today. The ruling coalition has agreed to a delay of three months.

The government, which will retain a third of the shares in the two companies, MTC Touch and Alfa, plans to use revenue from the sale to repay part of its debt. Revenue from telecommunications accounts for about 40 percent of the state's income, Hamadeh said.

Lebanon has debts of more than $41 billion following the reconstruction of the country after the 1975-1990 civil war and last year's conflict between Israel and Hezbollah in the south, according to the Economist Intelligence Unit. That represented 190 percent of gross domestic product at the end of last year.

``We need a good climate to attract investors'' before auctioning the companies, Hamadeh said. ``The Lebanese market potential is huge. We have a small penetration rate for a big market.''

Political Stalemate

Lebanon has been without a head of state since Nov. 23, when Syrian-backed Emile Lahoud left office at the end of his term. While the ruling coalition and the opposition have agreed on General Michel Suleiman, the army commander-in-chief, as the next president, they disagree on how to change the constitution to permit a senior public servant to take the post. They are also divided over who should lead the next government.

``We expected the delay given the political situation,'' said Laura James, a senior economist at the Economist Intelligence Unit. It is ``a symptom of what's going on more generally in the Lebanese economy where reforms, because of the political situation, have to be delayed or postponed.''

The delay to the sale was reported by the Daily Star newspaper today. Lebanon has about 1 million mobile-phone users who generate more than $750 million annually in net revenue for the government, according to the newspaper.

Saudi Telecom Co., Emirates Telecom Corp., Qatar Telecom QSC, Zain, the Kuwaiti telecom operator formerly known as Mobile Telecommunications Co., Bahrain Telecom Co., Orascom Telecom Holding SAE, have all expressed an interest, Hamadeh said. There is also a French-German company, which Hamadeh declined to identify.

Credit Ratings

Lebanon's credit rating outlook was cut to negative from neutral by Standard & Poor's on Nov. 26 after the country's parliament failed to choose a new president. The long-term foreign and local currency sovereign rating is B-, six places below investment grade.

Moody's rates Lebanon's long-term foreign currency debt as B3, also six levels below investment grade, and has maintained a negative outlook since November 2006.

Though Lebanon has a very good debt servicing record, because of ``the massive size of Lebanon's public debt burden'' the government ``can't afford to push the boundaries too far on this,'' James said. ``The only way to resolve the debt problem is going to be through fiscal measures ultimately, and if the fiscal account is looking as if it's going to be in trouble because they can't put through the reforms for political reasons, that's when people start to wonder about the future of Lebanon.'' -Bloomberg