Global Insight Perspective | |
Significance | Two of the Middle East's leading telcos are set to do battle as they race to win control of mobile assets in Lebanon. |
Implications | A victory for either Etisalat or Qtel will introduce new dynamics into the Lebanese mobile market as well as raise badly needed funds for the Lebanese government. |
Outlook | Given the political baggage associated with investment in Lebanon under the current political impasse, it is unlikely that any Western telco will emerge as a front-runner to take over the operations of Alfa and MTC Touch. |
Qatar Telecommunications Co (Qtel) and Emirates Telecommunications Corp (Etisalat) are squaring up to bid in the sale of either of the Lebanese mobile operators, Alfa and MTC Touch. Lebanon plans to sell majority stakes in the two mobile operators by 21 February 2008 to raise an estimated US$6.8 billion to help pay down its US$41-billion national debt. Reuters reports that the government expects to sell majority stakes in the companies and offer the rest to the public.
Speaking to reporters in a phone interview yesterday, Adel al-Mutawa, Qtel's executive director for group communications, said the assets in Lebanon fit the type of target Qtel is interested in. "We're looking at any opportunities for expansion in MENA and Asia, and Lebanon is going to be the first potential market in the region," he said, adding that Qtel was still evaluating which of the two operators to bid for. Meanwhile, Etisalat had on Monday (24 December) confirmed it was also considering a bid to take over one of the firms.
Outlook and Implications
Political Baggage: The interest of two of the leading telcos in the Middle East lends credibility to what could have been a risky investment gamble. Despite Lebanon's operating as one of the few democracies in the Middle East, the Lebanese political class is still factionalised between the Western-backed government coalition and the Syria-leaning Hizbollah opposition. Any winning bid will need the final approval of the country's government, raising the prospect of a heavily politicised bidding process. Given their ownership and previous associations, Qtel and Etisalat are unlikely to cause political rifts, although Mutawa already acknowledges that political stability has a very important role in the bidding process. However, any Western telco interested in the process will be wary of unfavourable sentiments and the safety of its investments in the Middle Eastern country.
Expansion Abroad: For both Etisalat and Qtel, the prospect of growth opportunities away from home is a welcome development. Apart from investing badly needed funds into the Lebanese economy, the presence of two of the Middle East's telecoms stalwarts will inevitably alter the dynamics of the Lebanese telecoms market. For Qtel, the Lebanese market offers it another foreign platform to continue to grow and add to the 16 countries it currently operates in. Although it still makes a large chunk of its profits at its Qatari home market, the launch of a second mobile operator in Qatar raises the stakes higher, creating an even stronger urge for Qtel to diversify away from home to maintain current profitability levels. Earlier in December, Qtel chief executive Nasser Marafih had told Reuters that the company planned further acquisitions after the US$3.72-billion purchase of Wataniya in March 2007. For Etisalat, the prospect of investing in Lebanon could not have come at a more appropriate time after it lost out to the Vodafone-led consortium for Qatar's second mobile licence (see Qatar: 11 December 2007: Vodafone Consortium Wins Second Qatari Mobile Licence and Kuwait: 5 March 2007: Qtel Wins 51% of Wataniya for US$3.72 bil.).