Editor’s note: In April 2022, the Lebanese Court of Audit issued a special report (No. 2/2022, based on report No. 114/2021), prepared by the Court’s fourth chamber, on the country’s telecom sector. The report analyzes the sector’s reality and details how public funds were systematically squandered, bringing the telecom sector to the brink of collapse had the service prices not been hiked. Below is a summary of the Court of Audit’s report, preceded by a commentary by Wassim Mansour, telecom expert and former General Manager of Touch Lebanon.

Since its establishment in the 1990s, the telecommunications sector in Lebanon has been subjected to a state-imposed monopoly that gave exclusive rights to only two carriers: touch and Alfa. The sector became run partly by the government and partly by private companies.

This has led to three clearly noticeable outcomes: First, it discouraged innovation in the absence of legitimate competition in the market. Second, it hindered the development of information and communication technology (ICT) services that could have benefitted the Lebanese economy in general and its digital economy more specifically. Third, and most importantly, the two carriers imposed excessively high prices in return for poor and limited service, as evidenced by numerous studies ranking Lebanon among the least competitive countries in this regard.

The policy that has governed the entire telecom sector, and especially the mobile sector, for more than thirty years stems from one essential fact: This sector holds great value, as it plays a vital role in people’s daily transactions and in developing other economic sectors and services.

This has enabled the telecom sector to generate very high revenues for Lebanon, amounting to at least USD 17 billion within a period of ten years (between 2010 and 2020), according to data included in the Court of Audit’s report issued last May. 

However, rather than being invested in development plans, these revenues were used to fund the fruitless and wasteful expenditure of successive Lebanese governments. They only fed into the dysfunctional clientelist and nepotist systems upon which the post-war regime was built.

Contrary to the role assigned to it in Lebanon, the telecom sector is usually considered to be one of the most vital economic sectors, since it plays a significant role in developing and advancing the economy. These technology services catalyze the growth and development of various economic and social activities, such as small and medium enterprises (SMEs), start-ups, health, education, tourism, banking, and various other services.

According to the International Telecommunication Union (ITU), any country’s gross domestic product (GDP) is directly influenced by its telecommunications sector: If active and effective, the latter can account for 4% of GDP through the direct and indirect job opportunities it creates and the welfare projects it funds. In India, for example, the telecom sector represents 6% of the country’s GDP, and this share is expected to rise to 8% in 2022.

In Lebanon, however, the reality is very different. According to the economic vision prepared by McKinsey & Company in 2018, the share of the telecom and ICT sectors combined amounts to only 3% of the country’s GDP, and the telecom sector accounts for 4,000 direct jobs.

Under healthy economic and financial circumstances, the sector can expand and generate revenues between USD 4 billion and 6 billion annually if more competition and innovation are enabled. This would increase the telecom sector’s share of treasury revenues, create thousands of skilled and high-paying jobs, and offer more effective services that enhance productivity in both the public and private sectors.

Unfortunately, we have been living under the “interim scenario” for the past 20 years, which has impeded the sector’s growth. We need to exit this spiral and unleash the sector’s potential to keep pace with rapid global developments, which would enable the sector to grow, allow more competition, and encourage innovation.

Wassim Mansour
Telecom Expert and former General Manager of Touch Lebanon

The 147-page report prepared by the Court of Audit on the telecom sector in Lebanon consists of three main sections: the organization of the telecom sector; its financial situation in Lebanon; and violations, outcomes, and recommendations. SMEX has read and analyzed the report. Below are the main highlights.

Section One: Organization of the Telecom Sector

First: Telecommunications Regulatory Authority and the Lebanon Telecom Company

Telecommunications Regulatory Authority

After analyzing the reality of the Telecommunications Regulatory Authority (TRA), the Court of Audit noted the following:

• The term of the TRA’s Board of Directors expired in 2012, and the Board’s functions were transferred to the Minister until 2017.
• No complaints, requests, or enquiries have been submitted to the TRA by ministries since 2017.
• The Lebanon Telecom Company has yet to be established.
• The TRA comprises 33 employees who receive excessively high salaries, especially given their low productivity.

Lebanon Telecom Company

It is a joint-stock company to be established by virtue of Articles 44 and 45 of Law No. 431/2002, which also specify its competencies. However, despite its issuance more than twenty years ago, this law has yet to be implemented, and the Lebanon Telecom Company has yet to be established.

Second: Organisme de Gestion et d’Exploitation de l’ex Radio Orient – Ogero

Ogero is a public institution established by the legislative branch whose functions are exclusively limited to the provisions of Law No. 21 of 27/12/1972 – that is, to manage and invest in the facilities and equipment of Radio Orient, whose contract with the government expired on 31/12/1972.

However, Ogero undertook works assigned to it by virtue of contracts concluded since 1995 that were not based on Law No. 21 and Decree No. 5613/1994. The decree specifies its duties based on the principle of specialization in the activities and tasks of public institutions. Instead, Ogero operated under successive decisions issued by the Council of Ministers.

These decisions tasked Ogero with establishing connections, expanding and operating the sector, performing maintenance on submarine cables, purchasing international bandwidth, and providing high-speed internet services. Along with this expansion, however, many questioned the legal basis of these contracts.

Third: Mobile Sector

Mobile Network Management and Operation Agreements

By virtue of the provisions of Law No. 393 of 1/6/2002, the Lebanese government terminated the build-operate-transfer (BOT) contract with the two companies operating MIC on 31/8/2002. As a result, the GSM system was transferred to the Lebanese government, and, after that date, all the sector’s resources and assets became public funds.

Since 2002, many mobile network management and operation agreements have been concluded, which included special commercial and financial provisions. These agreements also included special procedures regarding the oversight and supervision of the mobile sector which were contrary to those imposed by virtue of the financial laws in force.

On 14/8/2002, an official network custody and operation (NCO) contract was concluded between the Lebanese government, represented by the Ministry of Telecommunications, and FTML SAL (a company established in Lebanon to provide mobile telecom services and ensure the sector’s continuity).

In 2002, Mobile Interim Company 1 SAL (MIC1) was established and was tasked with implementing the NCO contract. In 2004, the government signed an NCO contract with former carrier LibanCell to ensure the continuity of the mobile network, and Mobile Interim Company 2 SAL (MIC2) was established.

Since the end of the BOT agreement, GSM revenues have fed into the state treasury and have been collected by the mobile carrier. Item 4 of the NCO contract established a Supervisory Board representing the Republic of Lebanon and comprising three members: a representative of the minister, a representative of the Republic of Lebanon’s financial consultant for the sale process, and an international telecom expert.

The contract required the mobile carrier to submit to the Supervisory Board, as of October 15, 2002, a bimonthly report on the operational expenses and detailed monthly reports on operational, accounting, financial, income, cost, employee, and other statements.

In 2004, the government held a tendering process in which it signed an agreement with Detecon for the management of MIC1. Later, in 2009, a management agreement was signed with Orascom Telecom as a result of the MIC1 tender.

Also in 2004, the government signed a network management agreement (NMA) with Kuwaiti company MTC to manage and operate MIC2. When the NMA expired, MTC Kuwait won the 2009 tender to manage MIC2.

The Council of Ministers kept renewing the expired agreements with the two mobile companies rather than hold a tender and issue a call for proposals after the specifications booklet was adopted in 2014. The most recent renewal took place on 5/5/2020. 

The attempts to hold a tender according to the specifications booklet approved by the government in 2014 (based on Decisions No. 7 and 48) failed, and the mobile network management agreements with the two carriers were continuously renewed by virtue of decisions issued by the Council of Ministers, the most recent of which was Decision No. 7 of 7/3/2019.

Accordingly, the Council of Ministers agreed to renew the two agreements until 31/12/2019. This was followed by Decision No. 3 of 5/5/2020, which transferred the management of Zain and Orascom to the Ministry of Telecommunications.

Expenditure in the Mobile Sector

Capital and Operating Expenses and their Evolution

The operation and equipment of the telecom sector after its reclamation required significant expenses, split into capital and operational expenses. However, numerous violations and cases of squandering appeared in the contracts, including:

• Capital Expenses for the 2G Network: In 2012, MIC2 was tasked with replacing the 2G Motorola network across Lebanon through a contract with ZTE. The project’s initial cost was USD 28 million, but it ended up costing USD 72 million. The Central Inspection notes in the report that “the cost of the network expansion was higher than the cost of the original network itself!”
  
  After only 6 years, upon the minister’s request, Touch, which manages MIC2, decided to contract a new supplier, Huawei, at an approximate cost of nearly USD 90 million, and to dismantle the ZTE network which was supposed to remain in service until 2025. The Court of Audit notes that “this led to the squandering of the millions in new and functioning equipment that was dismantled and stored in warehouses for the sole purpose of contracting a new supplier.”
  
  
• Capital Expenses for the 3G Network: 3G technology was introduced in 2011 following a tender organized by Touch (which manages MIC2). The contract was awarded to Huawei. Originally, the estimated cost of the 3G project was USD 25 million, but it ended up costing USD 128 million.
  

Alfa (which manages MIC1) implemented the 3G project between 2011 and 2012 following a call for proposals covering the entire network components. The total cost of the basic outputs was USD 41.6 million. At a later stage, the U900 project was implemented to improve the quality of the service at a cost of USD 170 million.

• Operating Expenses: Prior to 2012, the government paid a fixed annual fee estimated based on the offer submitted by each company for its overall operating expenses, on the basis of which they were awarded the contracts. The company’s profits were to be drawn from the surplus generated from this amount.

Key Observation by the Court of Audit on the Evolution of Expenses

“The contracts were amended after 2012, and the maximum threshold for operating expenses was removed. The two companies no longer managed their expenses – this responsibility was instead assigned to the minister. As a result, the two companies were no longer responsible for expenditure and had no decision-making powers. This arrangement should have led to a drop in capital and operating expenses, given the ministry’s supposed interest in optimizing the use of funds.

However, by 2012, revenues were declining amid a rise in expenditure. No plan was developed to reduce capital and operating expenses, which were excessively high compared to Lebanon’s area, the number of subscribers, and the distances between the stations of both carriers.”

The total revenues of the two companies dropped despite the increase in the number of subscribers from 3 million to more than 4 million. This was due to the rise in capital and operating expenses, according to studies submitted by the two mobile network operators in 2019 to the Parliamentary Media and Telecom Commission covering the 2010-2018 period.

In fact, capital and operating expenses rose by 128.71% between 2010 and 2018, although the average revenue per user (ARPU) was USD 29, “which is one of the highest rates globally and more than three times the rate in similar countries, as it not only covered service fees, but also the uncontrolled expenditure which is not based on any specific plans or programs that guarantee public interest and prevent the squandering of public funds.”

Employment and the Salaries of Mobile Sector Workers

• Number of Employees: The rise in the number of employees between 2010 and 2020 did not reflect the reality of the telecom sector during the same period: Between 2010 and 2018, despite the decreasing revenues, the number of employees at MIC1 (managed by Touch) rose by nearly 54.3% (from 714 to 1,052 employees), and the number of employees at MIC2 (managed by Alfa) rose by nearly 72.6% (from 434 to 749 employees).
  
  
• Employee Salaries: The rise in the number of employees was coupled with a rise in the cost of salaries denominated in U.S. dollars borne by the Lebanese government. After the crisis, many specialized employees resigned, in search for better job opportunities.
  

Owner Supervisory Board (OSB)

“It appears that the Owner Supervisory Board was intended to assume significant and broad responsibilities in the mobile sector. However, it was deprived of its powers, as the final decision was kept in the minister’s hands.”

“In fact, the minister was empowered to either accept or reject the OSB’s opinion based on their own discretion. In many cases, the OSB was disregarded altogether, whereby the minister directly approved or rejected company requests without consulting the OSB on matters that are subject to its oversight.”

Evolution of the OSB Staff: The number of OSB members increased significantly to reach 25 and 30 individuals, many of whom were assigned vague positions such as “kitchen duties” and “OSB Executive Secretary.”

These are not listed on the OSB’s records after 2017 that include the names of certain individuals without specifying their functions. These individuals are affiliated with the ministry or with the minister, not with the OSB. Some of them do not abide by the ministry’s working hours and could not be identified by anyone – rather, they were appointed by the minister, and they receive their salaries from the OSB.

Expenditure on the Salaries of OSB Members and the Minister’s Team: The total number exceeded 60 individuals in some cases. Article 15 of the management agreement with the operators stipulates that “OSB activities shall be funded by sums deducted on a monthly basis from the revenues. These sums shall not exceed 0.1% of the collected revenues and shall be disbursed in accordance with the minister’s instructions.”

However, the sums paid exceeded the authorized amounts stipulated in the contract between 2014 and 2020. For example, Alfa exceeded the authorized amount by USD 3 million in 2019, while Touch exceeded it by USD 121 million in 2016.

The amounts paid by the companies to fund the OSB’s activities were determined, managed, and disbursed by the successive ministers without any accountability or oversight and without any clear principles or criteria.

The payments covered travel expenses such as plane tickets, hotel accommodation for the minister and their team, and chartering a private jet for the minister, in addition to miscellaneous expenses for the minister’s bureau such as paper, ink, meals, anti-eavesdropping device, etc.

All these expenses were deducted from the OSB’s account, despite the fact that the contract explicitly states that the amounts paid by the companies and subtracted from the collected revenues shall only be used to fund the OSB’s activities.

The OSB received USD 40 million in 10 years!

Prior to 2017, ministers used to ask companies to issue cheques in the name of an attorney, indicating that the latter will cash the amount according to the instructions of the minister. However, the attorney never submitted an income and expenditure statement, which is why the Minister of Telecommunications, represented by the Committee of Cases, filed a lawsuit against the attorney. Unfortunately, this lawsuit has yet to be given proper attention.

After the OSB was dissolved, the minister had the sole authority to use its account at Bank Audi.

Administration Fees and Incentives

In 2018, despite the declining revenues, astronomical incentives were paid to the managers of the two companies, amounting to USD 5.5 million by Alfa and USD 9.5 million by Touch.

MIC Venture Fund

The MIC Venture Fund is an initiative launched by the Ministry of Telecommunications to support start-ups. MIC1 and MIC2 contributed to the MIC Venture Fund by purchasing 999 shares out of a total of 2,000, at a total capital of USD 20,000, from which the two companies paid their contributions. Alfa paid a total of nearly USD 3 million, while Touch paid nearly USD 4.6 million.

In this regard, the Court of Audit noted the following: “In addition to the fact that this falls outside the scope of competence of MIC1 and MIC2, many suspicions were raised regarding the companies that benefited from this initiative, their areas of work, the amounts they received, the outcomes they achieved, and their impact on the economy in Lebanon, as well as the mechanism by which the beneficiary companies proposed their ideas.”

Rent

Expenditure on rent rose significantly between 2012 and 2018. The report details the factors that contributed to this rise, including the lack of both, a mechanism to share the spaces rented by the two companies and of needs assessments and planning, and parallel contracting.

Between 2010 and 2020, MIC1 paid USD 168 million in rent, while MIC2 paid nearly USD 141 million, without taking into account the rent paid for the Solidere building.

For example, one year after renting blocks B and C of the building on plot No. 1526 Bachoura at a value of USD 6,400,000 annually and signing a contract at a value of USD 22 million to equip the building, the two blocks were purchased at a value of USD 75 million, after deducting the rent paid for the first year from the total amount, based on the minister’s request.

“The aforementioned contracts were not subject to prior administrative oversight, and the amounts paid previously, as well as those to be paid in the future, will be borne by the state treasury in one way or another. Therefore, having the state cover these costs without any meaningful oversight constitutes a flagrant violation of the law and a squandering of public funds, especially since other, less costly alternatives have not been considered, despite the current crisis.”

Network Maintenance

The two companies are responsible for maintenance. However, they often outsource tasks to other companies without holding any tenders or issuing calls for proposals.

For example, in 2018, the ministry signed a 10-year maintenance contract with Power Tech at a value of USD 16 million, in addition to a similar amount from Alfa (bringing the total cost to more than USD 30 million). In 2019, Touch signed another maintenance contract with Power Tech.

Power Tech was contracted under the pretext that it would save 15% of the cost borne by Alfa. However, the cost of Power Tech services to Alfa rose from USD 13.8 million in 2018 to USD 15.8 million in 2019, USD 19.6 million in 2020, and USD 6.8 million in the first six months of 2021 alone in maintenance fees, in addition to USD 47.4 million for diesel.

It also appeared that Power Tech was using employees and technicians from Touch’s maintenance department who received their salaries from the latter.

Advertisement, Promotion, and Sponsorships

Despite the lack of competition between the two carriers, they spent excessively high and unjustified sums of money on advertisements, promotions, and sponsorships. The report includes a detailed table listing expenditure on advertisement and sponsorships.

MIC1 and MIC2 are required to develop an annual schedule specifying their contribution and sponsorship expenses, to be approved by the minister. However, the minister often decided to disburse additional amounts not listed in the companies’ schedules.

For example, between 2016 and 2019, MIC1 made approximately 101 contributions amounting to a total of USD 3.9 million, while the Ministry of Telecommunications made 199 contributions during the same period, amounting to USD 11.8 million.

The Court of Audit also noted a sharp increase in this type of expenditure in 2018, as “the total sponsorship expenses paid by MIC1 between 2011 and 2021 amounted to nearly USD 31.6 million, in addition to USD 28.1 million in advertisements and promotions and USD 16.1 million in media expenses.”

The total sponsorship expenses paid by MIC2 between 2010 and 2018, inclusive, amounted to nearly USD 78.8 million. Sponsorship and advertisement expenses in 2018 alone cost up to USD 18.4 million.

Transferring the Management of the Telecom Sector to the Ministry of Telecommunications

On 1/1/2020, the operation contracts expired, and the management of the mobile sector was transferred to the Ministry of Telecommunications. On 5/5/2020, the Council of Ministers issued Decision No. 3 empowering the Minister of Telecommunications to terminate the management agreements signed with Orascom (for MIC1 mobile network) and Zain (for MIC2 mobile network).

Two years after the Lebanese government reclaimed the management of the mobile sector, the Ministry of Telecommunications has yet to implement item 3 of the Council of Ministers’ Decision No. 3 of 5/5/2020 on preparing a new specifications booklet, management agreement, and international tender participation and qualification terms and submitting them to the Council of Ministers for approval within a period of three months.

The new international tender to contract a company to manage and operate the two mobile networks in cooperation with the Tendering Department has yet to be launched, and the sector is still operated by the state-owned MIC1 and MIC2 indirectly through credit banks.

Section Two: Financial Situation of the Telecom Sector in Lebanon

The telecom sector is considered to be a source of revenue that feeds into the state treasury. In 2017, revenues accounted for 12% of the state’s total revenues, which is the fourth highest share after having dropped from 16% in 2012.

However, they have been in decline over the past few years from USD 1,432 million in 2012 to USD 681 million in 2019. Reversing this outcome is possible if the telecom sector is drastically reformed and developed.

Court of Audit General Observations on the Financial Situation of the Telecom Sector in Lebanon:

• Between 2010 and 2020, the total revenues of the telecom sector, including the mobile sector, reached nearly LBP 23.4 trillion, with the mobile sector accounting for 68.89% of this total amount.
• The Ministry of Telecommunications spent LBP 1.3 trillion through treasury advances or transfers between 2010 and 2019, in violation of the treasury advance procedures stipulated in the Law on Public Accounting.
• The revenues of the mobile sector transferred by the two carriers to the Ministry of Telecommunications between 2010 and 2020 amounted to nearly LBP 16.1 trillion, after which they began to decline.
• The two carriers adopt a private sector accounting system and prepare their financial statements according to the IFRS, and they register their revenues accordingly.
  
  Afterwards, they deduct the operation fees, and the remaining amount is transferred to the Ministry of Telecommunications. They do not abide by the Law on Public Accounting in their expenditure and are not subject to the audit on expenditure or to the prior and subsequent oversight by the Court of Audit.
  The sector’s funds are considered public and must be managed in accordance with the Law on Public Accounting and its amendments. The two companies should also be subject to the oversight bodies mentioned in the laws and regulations in force.
  
  
• The surplus deposited in the state treasury and transferred by the Ministry of Telecommunications between 2010 and 2020 amounted to nearly LBP 20.8 trillion, before dropping by 14.56% in 2014 and 7.30% in 2020. The Court of Audit called for further examination to determine the causes of this decline.
• The surplus deposited by the two mobile carriers in the state treasury through the Ministry of Telecommunications and directly between 2010 and 2020 amounted to nearly LBP 17.2 trillion.
• The expenditure of the two mobile carriers reached nearly LBP 8.1 trillion, which is the equivalent of 47.06% of the surplus and 32% of the total revenues. These rates are considered very high.

Section Three: Violations, Outcomes, and Recommendations for the Telecom Sector

First: Violations and their Repercussions

Violations in the Telecommunications Regulatory Authority

• The term of the TRA’s Board of Directors expired in 2012. Given that no new board was appointed, the current board continued to perform its functions, amid a state of administrative paralysis, a lack of productivity, and excessively high wages.
• All contracts were denominated in U.S. dollars, including employment contracts.
• Treasury advances were requested and disbursed but were not repaid, despite the surplus.

Violations in Ogero

Violations Raised by the Legislation and Consultation Commission:

• Ogero did not sign the maintenance and connection contract in 2017 and instead requested authorization to sign a mutual consent contract at a value of LBP 176.6 billion.
• The price for the same service rose by LBP 68 billion from 2017 to 2019 without justification.
• Ogero uses its cash reserves to perform certain works outside the framework of its contractual functions.
• Procurement, maintenance, installation, and construction contracts were signed by mutual consent with suppliers and contractors at a cost exceeding LBP 70 billion and without the prior approval of the Ministry of Telecommunications, in violation of the contract signed between Ogero and the Ministry in 2016.
• Ogero employees were assigned 93 missions abroad in 2017 at an approximate cost of nearly LBP 400 million.
• LBP 1 billion 247 million was spent to sponsor conferences, in violation of the principle of ensuring the continuity of public facilities and institutions.
• LBP 1 billion was spent on 12 consultancy contracts in 2017, and it later appeared that this amount exceeded the actual compensation.
• LBP 218 million was spent on furniture and supplies for the former minister’s office.
  
  

  Violations Raised by the Financial Public Prosecution:

• The Minister of State for Anti-corruption Affairs submitted a report on the spending of the accumulated funds in Ogero’s account, amounting to USD 160 million, to perform large-scale and expensive works for the Ministry of Telecommunications in 2017 and 2018 without signing any contract and outside any funding framework.
• A report was filed on the massive losses in the end-of-service indemnity fund for Ogero workers and employees. The fund’s balance stood at LBP 900 million, while it should have been more than LBP 100 billion.
  
  

  Violations Raised by the Public Prosecution at the Court of Audit

• Excessive sums were paid to Ogero’s director-general and managers, and its employees benefited from the new salary scale in 2012 in violation of Decree No. 7232/2012 on the Rising Cost of Living. The decision to increase salaries was not submitted to the Ministry of Telecommunications and the Ministry of Finance for approval.
• With regard to employment: In 2017, the number of daily laborers was 225. An additional 378 laborers were recruited in 2018, bringing the total number to 603. Meanwhile, according to Ogero’s own Directorate of Human Resources, the actual need for daily laborers did not exceed 234 new hires. The additional laborers were therefore employed illegally.
• There are discrepancies in the compensation of employed engineers. Some non-skilled workers, drivers, and call center workers were paid excessively high salaries, often much higher than telecom engineers.

Violations in the Mobile Sector

The two carriers adopt a private sector accounting system and prepare their financial statements according to the IFRS, and they register their revenues accordingly. Afterwards, they deduct the operation fees from these revenues, and the remaining amount is transferred to the Ministry of Telecommunications. They do not abide by the Law on Public Accounting in their expenditure and are not subject to the audit on expenditure or to the prior and subsequent oversight by the Court of Audit. Violations in the mobile sector include:

• The Supervisory Board did not perform its duties in preventing violations. Its role was often limited to acting as a contact point between the two carriers and the Ministry of Telecommunications, amid a total lack of oversight.
• No clear vision or plan was developed, which led to massive squandering of funds on renting spaces, stations, and buildings, without taking any serious initiatives to benefit from some of the rented spaces.
• The principles of comprehensiveness and non-allocation were violated, as revenues were earmarked to cover certain expenses, including human resources and the expenses of the OSB.
• Blatant nepotism and clientelism in employment.
• The salaries of mobile carrier employees, OSB members, assisting teams, and the teams of successive ministers were denominated in U.S. dollars rather than in the national currency.
• Discretionary practices in the deduction of the 0.1% of collected revenues to fund the activities of the OSB pursuant to the management agreement. The minister gave himself the freedom to deduct this percentage to cover the OSB’s expenses from all collected revenues, including fees and taxes, such as the VAT, stamp duty, etc. The law stipulates that these fees and taxes should be distributed to municipalities, the Civil Defense, and the state treasury according to fixed percentages.
• The amounts requested by the ministers and paid by the mobile carriers to fund the activities of the OSB were exceeded.

Second: Recommendations

The Court of Audit proposed a set of recommendations, essentially urging the Lebanese government to introduce much needed reforms to increase state revenues and improve the quality of services.

Recommendations to Ogero

• Spending should be limited to contractual frameworks in order to ensure the continuity of the public facility, improve the quality of service, and incentivize competition in the economy.

Recommendations to the Mobile Sector

• Open, transparent, and public tenders should be held for all capital and operating expenses, and projects should be submitted in advance to the Court of Audit for review.
• Excessive and unnecessary expenses should be limited. This can be achieved, on the one hand, by ceasing sponsorships and events and minimizing advertisement expenses, and, on the other, sharing and integrating infrastructure, enabling national roaming, regulating the work of distributors by adopting a unified policy, controlling rent fees, and reducing vehicle and fuel expenses.

Third: Court of Audit Decisions

First: Inform competent authorities of the contents of the report in accordance with Article 52 of the Law on the Organization of the Court of Audit.

Second: Inform Parliament of the violations committed by successive Ministers of Telecommunications since 2004, if proven.

Third: Inform the Public Prosecution at the Court of Cassation and the Public Prosecution at the Court of Audit of the violations mentioned in the report, which shall be referred to the competent courts if proven.

Fourth: Inform the Ministry of Telecommunications, Ogero, and the Telecommunications Regulatory Authority of the need to abide by all the recommendations mentioned in this report and to address any issues in the contracts previously signed with mobile carriers and prevent such issues in the future.

A copy of the report was submitted to the President of the Republic, the Speaker of Parliament, the Prime Minister, the Chairperson of the Parliamentary Media and Telecom Commission, the Minister of Finance, the Minister of Telecommunications, the Telecommunications Regulatory Authority, Ogero, the Public Prosecution at the Court of Cassation, and the Public Prosecution at the Court of Audit.

Conclusion

After only a few months of the issuance of this report, the Lebanese government and the Ministry of Telecommunications made decisions that are completely inconsistent with the proposed recommendations.

They decided to shut down telecom networks, hike prices, and resort to outsourcing, rather than directly provide the service. These measures undermine the telecom sector and reduce the quality of service, not to mention that they will cause the contraction of the sector, further reducing revenues and diminishing the quality of service.

Download full report here (in Arabic).