Before the Lebanese government endorsed Ogero’s seven-fold price hikes, journalist Ali Noureddine found himself at the mercy of his local internet distributor due to the unavailability of Ogero services in his residing area of Bchamoun-South of Beirut neighborhood. Now, as the government green-lights these increments, his plight persists with Ogero, albeit with a significant difference – the $20 he previously paid for an underperforming internet distributor will escalate to over $45 per month!
During the Cabinet session held on Thursday, August 3rd, the Lebanese Ministry of Telecommunications and Ogero, the primary Internet provider in Lebanon, sanctioned a revision in fixed communications and Internet tariffs. The basic 80 GB package cost has surged from 60,000 LBP to 420,000 LBP, while the 100 GB package has increased from 90,000 to 630,000 LBP. Similarly, the top-tier package, offering 2,000 gigabytes, has escalated from 900,000 to 6,300,000 LBP.
The fixed-line tariff has been adjusted to 200,000 LBP, accompanied by 1,000 complimentary minutes. This essential tariff “will cover Ogero’s essential expenses, encompassing printing, ink, collection, and billing,” according to Caretaker Minister of Telecommunications, Johnny Corm.
Following the endorsement of the new pricing structure and the government’s decision, which did not address the demands of “Ogero” employees concerning outstanding payments and salary increases, the employees are poised to take escalatory measures, potentially including a strike.
Just a few days later, Alfa, one of Lebanon’s two exclusive mobile operators, reported a disruption in its mobile internet services. This interruption was attributed to a glitch within the Ogero network, leading to the deprivation of residents in substantial areas from accessing these services until the following morning. This issue underscores the dependence of mobile telecommunications companies in Lebanon on the “Ogero” organization for internet provision.
Ogero Increases Service Rates for Subscribers Prior to E1 Subscription Adjustments for Beneficiaries
On each occasion, the government and its ministers turn to the citizen’s wallets to bridge the deficit, particularly within the Ministry of Telecommunications. This practice persists despite the Audit Bureau’s documented instances of billions of dollars being squandered, revealing numerous areas of potential expenditure reduction.
Among these areas lies the digital internet infrastructure, specifically the (E1) initiative, which was introduced several months ago. The E1 line represents an interconnected link with a consistently high-speed capacity, serving as a hub for multiple internet connections. During that period, Lebanon’s two principal cellular providers, namely “Alfa” and “Touch,” were accused of procuring internet services at lower costs and reselling them at nearly 40 times the original rate. Additionally, concerns were raised regarding the acquisition of internet distribution companies (cable) from “Ogero,” obtained at modest sums in Lebanese pounds and resold at significant markups in US dollars.
In an interview with SMEX, Representative Kabalan Kabalan asserts that an alternative to the escalation of Ogero’s rates could have been to “compel private enterprises to offset the losses stemming from their operations. These companies utilize government infrastructure for their services, specifically the E1 lines, which are more than 200,000. The inefficiency in this arrangement incurs a monthly deficit of $4 million. Coincidentally, private entities, including cellular providers and cable internet distributors, accrue a revenue of $10 million from this discernible disparity.”
In June, Representative Kabalan directed inquiries to Minister of Telecommunications Johnny Corm and the Lebanese government regarding Internet services and fiscal shortfalls concerning the E1 Internet initiative. Presently, he intends to seek resolution through the Financial Public Prosecution and the Audit Bureau. He aims to reclaim funds from the implicated companies and hold those responsible accountable for negligence within the relevant sector.
Contrastingly, Wassim Mansour, a communications expert and former CEO of Touch, the other mobile operator in Lebanon, expressed his perspective in an interview with SMEX. He deems the discourse surrounding the E1 issue as having taken on a “populist nature.” Mansour emphasizes that “Ogero harnesses an extensive network, an investment of hundreds of millions of dollars, to provide internet services to citizens at rates lower than competitors.” He underscores that “any price hikes, driven by currency devaluation, should be accompanied by an imperative to empower the Telecommunications Regulatory Authority in overseeing pricing, competition, and profit margins.”
The deficiency of Ogero services across multiple regions has led internet distribution companies to fill the void, a scenario exemplified by journalist Noureddine. “These private entities, including cable internet distributors, have taken on a resemblance to the generators’ mafias. They operate by carving up neighborhoods amongst themselves, resulting in the absence of genuine competition and an apparent disregard for their subscribers’ satisfaction, ” as the journalist described in a conversation with SMEX.
This sentiment is underscored by Mansour, who highlights that internet distribution companies have constructed networks atop the official infrastructure provided by Ogero. He urges the Ministry of Communications to oversee these networks, thereby curbing the proliferation of unauthorized installations.
Does Auditing Take Place in Telecom Companies?
In his interview with SMEX, Minister of Communications Johnny Corm defends his ministry’s strategic approach and explains that the decision to increase subscription prices for cellular services was methodically deliberated. This measure, he contends, has contributed to bolstering the Ministry of Finance’s revenue streams. This stands as a testament to the augmented earnings from both companies, a sharp contrast to the preceding decline induced by Lebanon’s ongoing economic crisis.
Corm further underscores the predicament the Ministry of Telecommunications faces, highlighting the challenge of realizing the budget allocated in 2022. He points out that, to date, the ministry has yet to receive the necessary funds for essential maintenance. The amount received, he adds, barely surpasses 13 million dollars from certain state entities solely to secure diesel supplies. He appeals to the Ministry of Energy for assistance in procuring diesel resources for his ministry.
While the specific contours of the Minister of Communications’ strategy remain unclear, particularly in light of the Audit Bureau’s report in February 2022 highlighting the squandering of millions over the years, the Minister articulates his intention to engage a private firm for an audit encompassing employee headcount and their associated pension obligations. Moreover, this audit would facilitate the implementation of promotions. However, a reliable source close to the cellular companies’ employees views this approach as “inequitable.” As per this source, promotions were carried out without a comprehensive assessment, seemingly grounded in networking and a standardized treatment across disparate income levels.
Minister Corm reveals that he has already initiated feasibility assessments, including the possibility of collaborating with PowerTech, a company entrusted with station operation and fuel provisioning, which is the subject of significant scrutiny within the State Audit Bureau’s report, raising substantial concerns.
“PowerTech’s intervention curtailed diesel consumption at the stations, something both cellular companies couldn’t do,” said Corm, referencing a study furnished by Alfa and Touch to the ministry. Furthermore, he emphasizes that the adoption of PowerTech’s services incurred a diminished expense compared to the financial outlay linked to the human, engineering, and technical workforce of Alfa and Touch.
Corm asserts that revitalizing the telecommunications sector hinges upon activating the Telecommunications Regulatory Authority’s role and invoking the tenets of Telecommunications Law No. 431, established in 2002. This would encompass the revival of “Liban Telecom,” a state-owned entity permitted to invest up to 40% of foreign capital. This reconfiguration, he illustrates, would transform Ogero into a counterpart to the two telecommunication companies, enabling the organization to channel its operational expenditures from its revenues, with the surplus channeled into the state’s treasury – a departure from the current scenario.
However, the enactment of this law has yet to receive government endorsement, primarily due to the intricate entwinement of this step with a sequence of appointments mandated by the state. These appointments encompass vital roles such as those within the Lebanese University, the regulatory body of the Ministry of Energy, and the Social Security arena, as articulated by Corm. The Minister underscores that the political discord surrounding the telecommunications sector has impeded the implementation of a decision with multiple facets, including a clause advocating the sector’s privatization. Another significant aspect of this decision is opening avenues for new partners, thereby aiming to dismantle the prevailing duopoly and introduce competition to reshape the landscape of cellular communication.
Austerity-Preserving Offers
Following the escalation of fixed telephone and internet subscription rates by Ogero, the inquiry arises: will the commission unveil offers reminiscent of those introduced by the two leading cellular telecommunications entities in Lebanon?
In July, both “Alfa” and “Touch” rolled out unprecedented internet package offers and complimentary call minutes, the first since the crisis hit the sector and the country. These promotions indicate a potential reduction in user numbers across these two networks, prompted by the substantial financial burden citizens bear monthly.
Nevertheless, “Touch,” in response to inquiries presented by SMEX, denies this notion and explains that its approach is rooted in an overarching strategy of consistently introducing novel services and offers. This strategy, they clarify, aims to provide customers with diverse options tailored to their individual preferences and requirements.
Furthermore, “Touch” denies any assertion of a decrease in the count of subscribers to their internet services. They contend that comparing subscriber figures for Internet and data services in the second quarter of the following year with the same timeframe in 2022 reveals a minuscule decline of at most 2%.
As explained by an insider within the telecommunications sector to SMEX, these seasonal promotional campaigns serve the purpose of invigorating dormant user connections. This source underscores that such offers, endorsed by the Ministry of Communications, constitute a legitimate marketing tool commonly utilized globally. It is an endeavor to stimulate subscribers to use their balances more actively. This source further highlights the timely correlation between these recent offerings and the tourist season, which traditionally experiences heightened demand for acquiring cellular lines.
Nevertheless, questions regarding the formulation and pricing of these offers persist, as highlighted by communications expert Wassim Mansour. He raises concerns about the fluctuating price structure, where rates surge during specific periods and sharply decrease during promotional campaigns. This volatility is particularly noteworthy considering the substantial tenfold escalation in sector pricing that has unfolded recently.
Feature image courtesy of Eliane Haykal, via Adobe Stock.
