On January 22, Marwan Hamadeh, the minister of telecommunications, announced that the government would delay the planned auction of Lebanon's two mobile phone companies, MTC Touch and Alfa, to May at the earliest.

"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 told local press.

The decision was prompted by the ongoing deadlock within the parliament over the election of a new president. On January 21, the day before Hamadeh's announcement, the vote to elect a successor to Emile Lahoud, who left office on November 23, was put off for the 13th time. The next attempt to convene the parliament for a vote is not scheduled until mid-February, close to the time the telecom's auction was set to take place.

While both the the government of Prime Minister Fouad Siniora and the opposition have agreed on a consensus candidate, General Michel Suleiman, the actual vote to install him in the presidential palace has been repeatedly postponed as the two sides wrangle over seats in the cabinet.

The inability to elect a new head of state has direct implications for the telecoms privatisation, as the final sale must be ratified by the president before it can come into effect.

The opposition Hezbollah bloc has clearly stated that it does not want to see the privatisation go ahead, although it had approved the sale when part of Siniora's cabinet two years ago.

Now, Hezbollah and its allies oppose the privatisation plan, citing the estimated $1bn in revenues that would be lost to the state annually and the potential transfer of what they describe as a strategic asset out of Lebanese hands.

One of Hezbollah's attempts to ensure a part of that asset was made public last year, when it was revealed in late August that the party had established an independent telephone network in southern Lebanon and then expanded its coverage into parts of Beirut.

Vowing to dismantle the network, Hamadeh said at the time the communications system was a violation of state rights. Nonetheless, Hezbollah is still in the telephone business, despite this criticism.

Critics of the proposed sale do have a point, given that the publicly owned telecommunications sector - both fixed line operations and mobile phone networks - represents around 40% of state revenues, according to Hamadeh.

However, he said the need to pay off debt, reduce fees and attract investment, as well as the state's reluctance to put money into new infrastructure, were compelling reasons for the sale and outweighed any losses.

A number of key international telecommunications firms, including Saudi Telecom, the United Arab Emirates' Etisalat, Qatar Telecom, Kuwait's Zain and Egypt's Orascom Telecom, have publicly stated their interest in buying into the Lebanese mobile phone market. However, some question whether this interest can be sustained in the face of political instability and a lack of broad based support for the sale.

Ziad Hayek, the head of Lebanon's Higher Council for Privatisation, said he believed the latest delay would not harm interest in the sale, but could be costly if extended further.

"Delaying the auction for two or three months is not going to hurt," Hayek said in an interview with local press on January 22. "But we cannot keep delaying this procedure indefinitely because we may be forced to spend lot of money to update the data room for the companies seeking detailed information."

Siniora's government intends to use the $6bn to $7bn it hopes to raise through the twin sales to reduce Lebanon's debt burden, which stood at $41bn at the end of 2007. The privatisation was one of the many measures to reform the economy and cut debt levels the government committed to at the Paris III donors' conference in January last year.

Under the existing plan for the sale of the two networks, two thirds of the shares of both companies are to be put on the block, with the state retaining the remaining holding in each service provider. This 33% stake will be offered to the public through an offering at a later date.

However, having failed to meet its own deadline for the auction of the majority stakes in the networks, insiders doubt a clear road map for the public offering will be laid out any time soon.

Sourec: Oxford Business Group