1

Dr. Kamal Shehadi ,

Chairman and CEO

Telecommunications Regulatory Authority of Lebanon

Telecom Finance- London27th January 2009

Building the Telecom Highways for

Economic Prosperity in Lebanon

2

Although reform has started with the establishment of the TRA,Although reform has started with the establishment of the TRA,most telecoms markets in Lebanon are growing slowly and suffermost telecoms markets in Lebanon are growing slowly and sufferfrom lack of competitionfrom lack of competition

Current Indicators

Current Indicators

35%35%Mobile Market Mobile Market

Fixed Market Fixed Market

Internet MarketInternet Market

ADSL Market ADSL Market

22

Penetration Penetration Number of SP

Number of SP

Private / State-owned

Private / State-owned

Level of Competition Level of Competition

State-OwnedState-Owned Monopoly Monopoly

63% (*)

63% (*)

11 State-OwnedState-Owned Monopoly Monopoly

32.5% (*)32.5% (*) ~ 16~ 16 Private Private Competition Competition

~ 7.7% (*)~ 7.7% (*) ~ 8~ 8 MoT / OgeroPrivate (bitstream,

line sharing)

MoT / OgeroPrivate (bitstream,

line sharing)

Limited CompetitionLimited Competition

3

The telecommunications market is still underdeveloped when compared toThe telecommunications market is still underdeveloped when compared to

other countriesother countries

Bahrain

Jordan

Morocco

Tunisia

United Arab Emirates

Egypt

Algeria

Venezuela

Romania

Chile

South Africa

Poland

Bulgaria

Slovakia

Hungary

Singapore

Ireland

Italy

Libya

LEBANON

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

0 10,000 20,000 30,000 40,000 50,000 60,000

LEBANONLibya

Italy

Czech Republic

IrelandSingaporeHungary

SlovakiaBulgaria

PolandSouth AfricaChile

Romania

Venezuela

Saudi Arabia

Algeria

Egypt

United Arab Emirates

Tunisia

Morocco

Jordan

Bahrain

Russia

Qatar

Kuw ait

0%

20%

40%

60%

80%

100%

120%

140%

0 10,000 20,000 30,000 40,000 50,000 60,000

Fixed Line Penetration vs. GDP per Capita (2005)

PSTN

Pen

etra

tion

GDP per Capita (USD/ Year)

Mob

ile P

enet

ratio

n

Inte

rnet

Pen

etra

tion

Mobile Penetration vs. GDP per Capita (2005)

Internet Penetration vs. GDP per Capita (2005)

GDP per Capita (USD/ Year) GDP per Capita (USD/ Year)

Sources: Economist Intelligence Unit, interviews with industry

With its GDP per Capita, Lebanon should be at around 55% penetration rate in Fixed Lines.

With its GDP per Capita, Lebanon should be at around 60% penetration rate in Mobile Lines.

With its GDP per Capita, Lebanon should be at around 22% penetration rate in Internet.

4

The TRA has assessed the strengths and opportunities of the The TRA has assessed the strengths and opportunities of the telecommunications market in its reform and liberalization processtelecommunications market in its reform and liberalization process

Pent up demand for Mobile services

High Mobile revenues (ARPU over US$ 65/month)

High charges Lag behind in terms of new

technologies Low market penetration Limited choice in mobile bundled

tariffs packages Shortage of adequate investments

Relatively competitive Lucrative segment New wireless technologies

deployed Pent-up demand for data

and internet services

Shortage of international bandwidth Access controlled by the MOT High int’l bandwidth prices, and non

optimal allocation of bandwidth among providers

Incomplete Regulatory framework

Relatively good copper infrastructure

Regionally competitive price per minute

De jure MoT monopoly Low incentive to upgrade the

infrastructure and introduce new technologies

Low penetration rate Stagnant growth

High pent-up demand and important growth potential in all telecom markets

Growing economy with a stable financial system

Appropriate regulatory framework to attract investors

Consumer behavior/early adopter of telecom services

Liberal political and social environment

Dynamic private sector

Fixed Voice

Mobile

Data

Mobile

Data

5

2009 2010 2011 2012 2013 2014

Mobile Network Operator

Virtual Network MNVOs

PSTN/ Basic Telephony

Network Operator

Resale

BroadbandAccess

National (core, metro and access)

International Gateway

Voice and Data Facilities Based Provider

Data Only Facilities Based Provider

Voice and Data Resellers

3

(4)

(1) The privatization of the mobile sector will depend on the regional and international financial markets conditions

(2) Two mobile operators and Liban Telecom(3) Two National Broadband Licensees and Liban Telecom(4) Two mobile operators and Liban Telecom(5) Two National Broadband Licenses, subject to CoM’s decision

1

3

3

2(5)

(2)(1)

License Award

Open licensing

Market Review

??

(3)

TRA is planning for the liberalization of most telecom services in 2009

6

TRA is aiming to have infrastructure-based competition in the provision of broadband services

7

The TRA plans to issue, following an international auction, two national The TRA plans to issue, following an international auction, two national broadband licenses for international, core, metro, and access networksbroadband licenses for international, core, metro, and access networks

The TRA plans to issue two types of Broadband LicensesThe TRA plans to issue two types of Broadband LicensesThe TRA plans to issue two types of Broadband LicensesThe TRA plans to issue two types of Broadband LicensesNational Broadband Licenses (NBLs) with:

Rights to build/offer (fixed and spectrum based) Access, National Backbone and International network/services Obligations to meet access and national backbone rollout conditions with minimum build for fiber Exclusivity period to interconnect new sites of other BAL providers via its national backbone

Broadband Access Licenses (BALs) : National or regional With or without spectrum, Existing Data Service Providers continue to use their national Microwave backbone to backhaul existing sites BALs originally rely on the NBLs for new site connectivity

Broadband Deployment TimelineBroadband Deployment TimelineBroadband Deployment TimelineBroadband Deployment TimelineDraft RFA for Consultation (including BB

License) NBL Auction

Broadband Policy

Statement

Broadband Deployment TimelineBroadband Deployment TimelineBroadband Deployment TimelineBroadband Deployment TimelineSpectrum

Re-farming & RTU fees ROW &

Duct s Decree

Jan 09July 09 December 09

8

The regulatory framework and the public consultation process adopted by

TRA aim at ensuring the success of liberalization

Consumer Affairs Regulation

Consumer Affairs Regulation

Lebanese National Frequency Table

Lebanese National Frequency Table

National Numbering PlanNational Numbering Plan

Spectrum Management and Licensing

Regulation

Spectrum Management and Licensing

Regulation

Drafting Stage Draft Ready Stage Consultation Stage Final Review (TRA Board)

Issued

Type Approval RegulationType Approval Regulation

Accounting Separation Regulation

Accounting Separation Regulation

Spectrum Pricing Opinion Spectrum Pricing Opinion

Significant Market Power Regulation

Significant Market Power RegulationUnbundling RegulationUnbundling Regulation

Broadband Policy Statement

Broadband Policy Statement

Liberalization RoadmapLiberalization Roadmap

LicensingRegulation

LicensingRegulation

Interconnection RegulationInterconnection Regulation

Decisions: • VSAT, • Trial IPTV• Spectrum trial

Allocation for MoT / OGERO

Decisions: • VSAT, • Trial IPTV• Spectrum trial

Allocation for MoT / OGERO

VOIP Policy Statement

VOIP Policy Statement

Pricing RegulationPricing Regulation

National Roaming National Roaming

* Interconnection Interim Pricing Decision

* Interconnection Interim Pricing Decision

Spectrum Re-farming and

Packaging Plan

Spectrum Re-farming and

Packaging Plan

Quality of Service RegulationQuality of Service Regulation

Decision for establishment of call centers

Decision for establishment of call centers

Universal ServiceUniversal Service

CS / CPSCS / CPS

Improving FM Broadcasting

Improving FM Broadcasting Numbering

Regulation

NumberingRegulation

Access to Information Regulation

Access to Information Regulation

Digital Migration Strategy for TV Broadcasting

Digital Migration Strategy for TV Broadcasting

9

TRA is promoting Infrastructure Sharing and access to Rights of TRA is promoting Infrastructure Sharing and access to Rights of Way prior to the broadband licensing to lower the barrier to Way prior to the broadband licensing to lower the barrier to entryentry

All Existing Infrastructure * owned by ROL

*All Existing Infrastructure:

-Fixed Infrastructure-Mobile Infrastructure-Water, sewers, drainage-Electricity-Roads, Streets, Highways

Telecom Law permits access

IS/RoW for Service

Providers

10

Incumbent BenefitsIncumbent BenefitsIncumbent BenefitsIncumbent Benefits

New Entrant BenefitsNew Entrant BenefitsNew Entrant BenefitsNew Entrant Benefits

Broader BenefitsBroader BenefitsBroader BenefitsBroader Benefits

Allowing infrastructure sharing has important benefits for all stakeholdersAllowing infrastructure sharing has important benefits for all stakeholders

Allows for quick recovery of new investment cost

Provides new revenue stream through cost-based rent

Allows for quick recovery of new investment cost

Provides new revenue stream through cost-based rent

Deploys network and services to customers faster

Reduces cost of deploying new network for new entrant (60-70% for civil works)

Deploys network and services to customers faster

Reduces cost of deploying new network for new entrant (60-70% for civil works)

Faster deployment

Allows investors to reach less densely-populated areas by sharing deployment cost

Optimize use of scarce national resources

Eliminates redundant, costly, and disruptive public works

Reduces environmental damage caused by constructing new data networks

Faster deployment

Allows investors to reach less densely-populated areas by sharing deployment cost

Optimize use of scarce national resources

Eliminates redundant, costly, and disruptive public works

Reduces environmental damage caused by constructing new data networks

The TRA expects a decision by the Government of Lebanon to re-launch the mobile auction following the parliamentary elections (Summer 09)

Scope of Mobile Licenses Provision of any service over the licensed frequencies, including 3G mobile broadband services Build-out and operation of a facilities-based international gateway Provision of all international services to their own end usersInfrastructure sharing strongly encouraged as long as it does not limit competition

Obligations Geographic roll-out and coverage obligations are not onerous (areas already covered) Introduction of mobile number portability Provision of national roaming to the third entrant to allow a faster development of competition

Scope of Mobile Licenses Provision of any service over the licensed frequencies, including 3G mobile broadband services Build-out and operation of a facilities-based international gateway Provision of all international services to their own end usersInfrastructure sharing strongly encouraged as long as it does not limit competition

Obligations Geographic roll-out and coverage obligations are not onerous (areas already covered) Introduction of mobile number portability Provision of national roaming to the third entrant to allow a faster development of competition

Mobile Auction Launch:

RFA published

Mobile Auction Launch:

RFA published

January 2008

Licensing Process

Suspended

November 2007 To+ 2 (Mths)

GoL Decision to Re launch Process

GoL Decision to Re launch Process

Auction – Announcing two winning

bidders

Auction – Announcing two winning

bidders

To To+ 5 (Mths)

Handover completedCrucial phase that

should be completed smoothly and in the

specified time

Handover completedCrucial phase that

should be completed smoothly and in the

specified time

Technical & Pre-Auction Financial Bids Due

Technical & Pre-Auction Financial Bids Due

To+ 3 (Mths)

12

The way forward for regulatorsThe way forward for regulators

Regulators must give higher priority to lowering the financial and physical barriers to entry to promote investments in underserved markets

Infrastructure sharing, both for new and existing infrastructure, has become even more pressing

Auctions are still the preferred way to go, not primarily for the revenue-generating objective, but for the fairness, simplicity, and transparency of a well-designed auction

Regulators should look at revenue-sharing arrangements more positively than in the past for two reasons:

As one way to ease the financing requirements of new telecom investmentsAs a mechanism to ensure that the value of the telecom assets is carried over beyond the current economic and financial crisis