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Exploring the ongoing hardships of the telecom and ICT sectors in Lebanon, Telecom Review successfully hosted the virtual panel, “The Telecom Sector in Lebanon: From Pioneering to Collapse,” which covered the continuing implications of the crisis for customers as well as the challenges faced by businesses and the sector as a whole.

In his welcome note, Mr. Toni Eid, Trace Media CEO and founder of Telecom Review Group, pointed out the serious issues faced by the Telecommunications sector, including economic collapse, and mentioned that no country can operate without a proper ICT infrastructure.

The Minister of Telecommunications of Lebanon, Engineer Johnny Corm, discussed Lebanon's current telecom status and the challenges faced by the sector. The telecom industry has been facing numerous financial as well as other challenges, including the amendment of Budget Law 36 (that has prevented CAPEX payments since 2019), Lebanese currency devaluation and the absence of the electrical bridge. The loss of sector talent, or “brain drain,” has also been a significant issue. However, despite these challenges — or maybe motivated by them — the telecom sector has been working day and night to avoid collapse. Corm emphasized his firm belief that, because of this commitment, the sector has not yet collapsed and is unlikely to do so.

The mobile sector has been able to avoid the issues faced by the fixed sector. The Ministry of Telecommunications, along with Alfa, touch and Ogero, has unified its efforts to save the sector from collapsing. Phase one of the global master plan to improve communication service quality and continuity within the sector has been implemented. The minister highlighted some achievements, such as improving the network availability to 99%, the quality of voice services and the average data speeds. Additionally, subscriptions to new services have increased by 1.5 million for both Alfa and touch combined.

Corm concluded by quoting John F. Kennedy, emphasizing the efforts of those who have worked hard to safeguard the sector.

Telecom Players Pushed Through Crisis, Must Now Call for Major Reforms

Addressing the first question to the panelists, Issam Eid, COO of Telecom Review Group (Levant and Africa) and managing partner of Trace Media Lebanon, inquired about the main reasons for the sharp decline and deterioration of the telecom sector. He asked how they would best describe the current reality that the country is in.

Sharing his perspective, Dr. Imad Hoballah, CEO and chairman of Business Investments and Development Strategies (B.I.D.S.) and former minister of industry, first mentioned the challenges that Lebanon is facing as a whole: political instability, corruption, economic crisis, currency devaluation, high level of debt, lack of investments, power interruptions and the decrease in the purchasing power of customers.

But looking at the specifics within the telecom sector, Dr. Hoballah said that these issues “had roots in previous years”; even though the sector was doing okay on the surface, it suffers from an “archaic and detrimental structure.” This covers the sector’s ownership as well as the control that is in the hands of the government; regulatory issues; limited competition in mobile and landline services; a lack of financing and investments; and a major talent exodus.

“Businesses across the country in different sectors are suffering because of where we are today. We really need to face those challenges head-on… Major reforms need to happen,” Dr. Hoballah pointed out.

Regulations need to be changed, and investments must be incentivized, to get the telecom sector up and running. “The private sector has to be backed as a major player, rather than being on the fringes.”

In addition, Jad Nassif, CEO and chairman at Alfa shared that they have made “many efforts during the past two to three years” and that, in the long run, they can “change the perception of the customers through consistency and teamwork”; this is especially true with the Ministry’s full support.

Alfa has implemented many initiatives, mainly on the operational front, to optimize their current workforce, which was reduced by 30–50% during the crisis.

Nassif emphasized the country’s improved network performance, based on the latest Ookla Speedtest Global Index. Currently, Lebanon is ranked 68th out of 100 countries in mobile speed, with an average of 31 Mbps, whereas in June 2022, they were in the 103rd position with only a 17 Mbps speed. “This improvement is the result of continuous work and network optimization, knowing that we have faced massive challenges,” explained Nassif.

All network KPIs were achieved, according to Nassif, as a result of “network availability [up to 98%], optimization and coordination with the minister.” He continued: “Believe me, these efforts will bring the sector to a model of stability and definitely not a collapsing mode.”

Additionally, Salem Itani, CEO and chairman at touch, said that “this whole collapse” has been dealt with positively and that they “made a lot of solutions that are out of the box.” touch can recognize      5G live at a speed of 2 Gbps and an EBITDA margin of more than 50%, which is very good in terms of the current norms. In the call center area, he noted that “facing zero resources, through effective collaboration, we've reached an answer rate from 30 to 100%.”

With a cloud core and 5G-ready network hardware that needs “further investment in licenses and software upgrades,” Itani affirms that they were a “success story in confronting the crisis,” and they are “ready to face the future and enhance the network more.”

Privatization of Telecom Sector: Too Soon Now, but Soon to Come

The panel’s second question discussed Lebanon’s position concerning the allocation or privatization of the telecom sector. Sodetel, Ogero and Alfa’s executives have all agreed that privatization is not possible with the current state of the country’s economy. Instead, certain measures must be taken to prepare for it.

Patrick Farajian, CEO and chairman, Sodetel, explained that “most of them are engaged in firefighting mode and looking into the future.” Farajian highlighted the fact that, in the current economic situation, they cannot talk about privatization. “Which investors would come to Lebanon and invest in a hyper-inflationary economy when there is no regulation, no long-term policy?”

On a positive note, he expounded that they do have the tools at hand to start “incremental changes to reform.” Looking at the fixed network, as per Law 341, they can first proceed to corporatization before pursuing privatization.

Faraijan also mentioned that it is important to have a “reactivation of the regulatory authority” to set up visibility in order to attract and encourage investors to spend in the telecom sector. In addition, a proper national broadband plan should be laid out.

In this transitory period, privatization is not realistic or a priority, but public-private partnership (PPP), as per Law 48, can work with coordination between the ministry and council of Ministers.

In line with this, Alfa’s CEO considers the key to privatization as being a “political decision.” On the network level, however, they are ready. Indeed, they are “laying the foundation for 5G — continuously optimizing and shutting down obsolete technology.”

“Legally, there are no major barriers, but economically speaking, the move towards privatization is not viable now… Economy stability and unified dollar rate are key for adopting a successful privatization scheme,” Nassif said.

For Imad Kreidieh, CEO and chairman, Ogero, despite having enough expertise and skills in order to manage in the telecom sector, nobody at the political level has the will for the intention and resilience of making it happen.”

“We cannot keep on claiming that we don’t invest in the telecom sector and prevent the private sector to be part of rebuilding a sound and sustainable telecom sector,” Kreideih expressed. Thus, the “core problem resides in political decision-making, not about technology or technical capabilities.”

Kreidieh invited the politicians to “make up their minds” and make “reasonable and mature decisions regarding the telecom sector.”

A Third Operator in Lebanon Will Bring Employment Opportunities

On this subject, Imad Kreidieh said that outside the framework of 431 and the third license, Ogero had initiated a project back in late 2017 with the deployment of around 91 fixed wireless access sites dedicated to data, enabled by VOLTE on those 91 sites.

“The operation was extremely successful. The return on investment on those sites happened in less than 24 months. I was hoping that in 2019, before the political and economic collapse, Ogero would be able to expand and deploy an additional 300 sites on fixed wireless access to create and lay down the foundation of the third operator and create competition. Although I'm not interested in the voice business, I am interested in the data business more than the voice business. We would have created a good platform in order to make sure that inclusion, which is one of the most important pillars of a beneficial public sector,” he said.

“It would have helped all rural areas to be included in the telecommunication action that is taking place in Lebanon. Unfortunately, the incidents of 2019 and what followed brought this project to a complete stop. But yes, we have thoughts about implementing the third license, even though in a not-so-Orthodox way,” he further stated.

Adding to the conversation, Dr. Hoballah said that he agreed with Imad Kreidieh’s view concerning the political brass and their reluctance or refusal to make decisions that could kickstart a change or a reform in the sector. He was confident that this was where the problem resided: “I think there is a misconception, and I apologize to everybody here who may get offended; in my mind, I don't think there is something necessarily called the ‘third license.’ The law talks about a license and mobile license to live on telecom, but it's not necessarily a third license.

“There are ways to deal with the sector, and my only concern at this point is [that] if we go ahead directly with one telecom without adjusting some other things in the sector, we would still be encouraging a lot of competitive issues in the market. We really need to do something that preserves the sector and allows it to flourish, and [we need to] make sure that access to the fiber network is planned properly. And the other companies are not disadvantaged by a company that is very strong with comprehensive services and infrastructure. The balance should be there, and a strong TRA is necessary to make sure that it is done,” Dr. Hoballah explained.

The Deterioration of the Lebanese Pound May Cause Lebanese Isolation

“We don't have any choice but to be able to provide the sustainable service. We have the Ministry of Finance, who is in charge of the finances of the Telecommunications sector of MoT and Ogero to be ready to intervene, and it must.... More than 70% of Ogero’s financial needs — our international bandwidth, imports for spare parts and licenses to support contracts — are paid in dollars. Unfortunately, we're still pricing in Lebanese pounds and we are fighting against the political class regarding the issuance of a new tariff that is badly needed today in order to bring back some financial equilibrium to MoT and Ogero," Imad Kreidieh said.

“I know that the ministry is working on a new decree that will probably take a couple of months before it is validated. We need the government to explicitly put a subsidy for the telecom sector for a temporary period of time, including broadband and fixed telephony. Otherwise, the connectivity environment is at stake and in great danger. So somebody needs to make the decision. I know that Minister Corm does not have this privilege because a pricing decree needs to go through the Council of Ministers, and until then, [he] and I are completely helpless in this regard. If we fail to pay our dues to T1 providers in capacity, I'm afraid there's not much that I can be doing in order to keep Lebanon connected to the rest of the world.

“This is what we are going through today on a day-to-day basis: fighting for the survival of the sector, fighting for the sustainability of the businesses because we need to pay attention to the whole ecosystem and not just MoT and Ogero. Imagine Lebanon disconnected from the rest of the world — we are talking about the healthcare system, security and already hurt banking sector. The prime minister, the government and the ministry of finance would be sleepless these days, worried about what if the Telecommunication sector is going down. What would happen?” Imad Kreidieh pondered.

Adding to the conversation, Patrick Farajian opined that tariffs were the key issue today. He said, “In the absence of reform, which would involve the Council of Ministers, tariffs are a key issue, and today's tariffs do not cut it.” He added that the pricing of the fixed network for the broadband is based on 1US$/ 3,900 LBP, which is not sustainable for Ogero — not for the private sector. “You can get a fiber connection at US$2, which is very low for a country such as Lebanon, which needs investment. If we do not address the tariff issue, we are in big trouble. It should be addressed not only in absolute value but also in the tariff differential between different services.”

He cited the example of fiber being priced the same as DSL, whereby he compared the investment difference between the two technologies: “To attract private investors in the private domain, we need to adjust the tariffs of fiber above the level of DSL. We cannot price fiber the same as DSL.”

Besides the reforms in tariffs, Farajian also urged the telecom ministry to facilitate access to satellite connectivity for a temporary period and said that it would benefit the telecom sector in many ways.

Where Does Lebanon stand regarding 5G’s Deployment?    

During this fruitful section, the moderator posed a question to Salem Itani, CEO and chairman of touch, asking for his perspective on 5G deployment. Itani responded by stating that touch will have a complete vision and strategy for 5G deployment by the end of 2023 and that all necessary building blocks should be in place by then. He mentioned that 5G infrastructure requires license preparation as well as software and hardware upgrades, and that touch has already modified their core and IT systems to cater to 5G. He explained that touch's approach to 5G implementation will be different from other operators in the region, as it will be more studied, related to return on investment and based on valid use cases. Itani added that touch will start implementing hotspots by 2024, targeting areas with high traffic and service needs; they will also test narrowband IoT scenarios and try to find markets for it as a service. In summary, touch has a holistic view of 5G deployment, with a complete chain of building blocks that will be implemented step-by-step starting this year.

Jad Nassif, CEO and chairman, Alfa, also tackled this question. He explained that Alfa has partnered with Ericsson, Nokia and Huawei to install 5G testing at 11 live sites at zero cost. They’ve achieved exceptional download speeds at the headquarters and confirmed their readiness in terms of site, technical, commercial and human resources.

However, he believes that the ecosystem in Lebanon is not yet ready for commercial deployment due to the massive effort and budget required. Currently, Alfa is focusing on network maintenance and support, including enabling VoLTE for eligible subscribers. Nassif believes that before preparing for 5G, they need to get back to their previous network level. He hopes to have a better plan and vision for 5G investment next year, as he does not see the return on investment coming this year.

E-Wallet: A Potential Solution for Lebanese Customers

Moving to the last question about the topic of e-wallet mobile, Itani offered his belief that this could be the solution for the current situation in Lebanon. Transactions today, whether paid in US dollars or Lebanese lira, are done in cash. So the e-wallet will come as a true solution for citizens.

Noting that mobile operators cannot run this service alone, the touch CEO stated that this project should be done through a partnership with the right companies: those both licensed to provide e-wallets and able to best provide solutions for the customers.

Itani stated: “We are all suffering from the cash payments — whenever we want to subscribe, for example, for international services or whenever we travel. E-wallet is a need that should be tackled through partnership. And it will be safer, secure continuing implications and easier to be used.”

From his perspective, Alfa CEO Jad Nassif believes that the e-wallet is a big part of digitizing customers’ experiences and giving them more autonomy while      self-managing their services. He noted: “We have done small steps toward the adoption of e-wallet, but the barrier is the capability to offer a complete experience, and this is directly related to regulations. In the future, and in case we got permission from BDL, definitely we will launch the e-wallet.”

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