Executive summary
Tariff reductions and new 3G networks to stimulate market demand
Lebanon’s telecoms market holds a unique position in the Middle East given the level of government involvement. While most incumbents in the region are government owned, within Lebanon government ownership extends to the country’s two mobile operators. Privatisation seems unlikely for some time given the telecoms sector is a significant generator of government revenue. However this same structure has fostered a lack of political will to make the changes necessary to free up the market in order for it to reach its potential. Consequently, despite a higher GDP per capita, Lebanon languishes well behind neighbouring Jordan in ITC development, with the inevitable consequences of lower economic and social outcomes than would otherwise be the case.
Prices are set by the Ministry of Telecommunications (MoT). Previous governments followed a strategy of limiting subscriber numbers and keeping tariffs high, resulting in the highest prices in the Middle East and the lowest penetration rates. However the market is evolving, most notably in the broadband and mobile markets.
The broadband market is now almost entirely comprised of ADSL services, which is widely available from a number of ISPs. The relative late entrance of ADSL promoted development of alternative access platforms including cable and wireless. All ADSL connections are obtained on a wholesale basis from the incumbent, Ogero. Most significantly, broadband affordability improved drastically in August 2011 when a decree was passed that slashed tariffs and increased speeds, with tariffs reductions of up to 80%. The improved affordability has been made possible due to increased international bandwidth following the commissioning of submarine cable I-ME-WE.
Lebanon has two government-owned networks, operated by Orascom Telecom of Egypt and Zain of Kuwait in return for a management fee, with all revenue going to the government. Lebanon’s mobile market recorded a growth spurt in 2009 when the government took the radical step of lowering tariffs and increasing the maximum number of subscribers for each operator, demonstrating the amount of pent up demand in the market. The market is set to enter a new growth phase centred on mobile data services after both mobile network operators were awarded 3G licences in 2011 and commenced deploying 3G network infrastructure.
