Summary of Request for Applications to participate in a tender process for twenty year licenses together with the acquisition of the businesses of

Transcription

1 Summary of Request for Applications to participate in a tender process for twenty year licenses together with the acquisition of the businesses of two existing mobile network operators Issued by the Telecommunications Regulatory Authority and the Higher Council for Privatization of the Lebanese Republic on 2 November 2007

2 1. INTRODUCTION This summary should be read as an introduction to the Request for Applications (the RFA ) and is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing in the Request for Applications. This is intended for the internal use of the Republic of Lebanon. The Republic of Lebanon, acting through the Higher Council for Privatization (the HCP ), and the Telecommunications Regulatory Authority (the TRA ), is offering interested parties an opportunity to participate in a tender process leading to the acquisition of the subscribers, and certain of the related assets and liabilities and contracts, of each of the two existing state-owned mobile telecommunications operators, together, in each case, with the award of a 20-year license to build, own and operate a mobile telecommunications network and provide mobile telecommunications services in Lebanon. 2. THE TENDER PROCESS Each of the two mobile telecommunications businesses is offered and will be sold in combination with a license, in each case referred to as a Combination. The RFA will be published on 2 November The HCP and the TRA will set up an online data room containing extensive information in respect of each business to be sold and license to be awarded. Interested parties wishing access to the online data room must submit expressions of interest and pay to the TRA a non-refundable entry fee of US$50,000. They will also be required to execute a non-disclosure agreement and an acknowledgement of online data room rules and procedures. Interested parties will be permitted to submit questions to the HCP and the TRA. The HCP and the TRA will respond to all timely questions received. The Council of Ministers is expected to meet on or around 24 January 2008 in order to confirm the timetable for the auction. Under the timetable in the RFA, applications must be submitted on 1 February Applications must include sealed pre-auction bids for the Combinations on the basis that the licensee will pay to the Republic of Lebanon a 0% or a 10% revenue sharing over the course of its license. Any pre-auction bid for a Combination must be submitted for both of these scenarios. The HCP and the TRA will assess the applications for compliance with the requirements and qualification criteria of the RFA, and will announce which applicants qualify to participate in the auction and which do not. To qualify, an applicant must be, or must include in its consortia, a mobile network operator (or its affiliate) having at least three years experience operating a mobile network. This mobile network operator (or its affiliate) must provide mobile services to at least 1 million subscribers, of which at least 500,000 are in a single market. The mobile network operator (or its affiliate) must commit to hold 15% of the equity of the licensee entity for at least 5 years. It must also commit to enter into a management agreement with the licensee entity for at least 5 years unless it will hold a majority of the licensee s equity for this period. Other consortium members must commit to hold their shares for at least 3 years. These share lock-up provisions may be lifted by the TRA in its discretion if the licensee satisfies certain network, upgrade, rollout and coverage requirements to be set forth in the license. In addition, an applicant s business plan must be viable and realistic and

3 demonstrate adequate financial resources. Its technical plan must demonstrate a competent plan for operating and developing a high quality mobile network. The RFA provides for the auctions to be held 3 days after the HCP and the TRA have announced the names of the qualifying applicants. On the day of the auctions, the joint auction committee of the HCP and TRA will in private open the sealed pre-auction bids of the qualifying applicants and destroy (without opening) the sealed pre-auction bids of the non-qualifying applicants. On the same day, the HCP and the TRA will forward the amounts of the pre-auction bids (without disclosing which applicant submitted which amount) to the Council of Ministers. On that same day, the Council of Ministers will determine whether a 0% or a 10% revenue share will be payable by the licensees to the Republic of Lebanon. The percentage revenue share will be the same for both licensees. The auctions will be conducted on that day on the basis of the applicable revenue share in the manner described in section 3 of this summary. In order to ensure that the pre-auction bids serve as a useful indication of the potential results of the auctions for the purpose of the Council of Ministers decision on the revenue share percentage, the HCP and the TRA will exclude an applicant from the auction of a Combination if its pre-auction bid for that Combination was the lowest and was below 50% of the average of all pre-auction bids for that Combination. Following the auctions, the HCP and the TRA (through the Minister of Telecommunications) will notify the Council of Ministers of the identity and highest bid amount of the highest bidder for each Combination. The Minister of Telecommunications will then make his recommendation to the Council of Ministers. Within two weeks after receiving such recommendation, the Council of Ministers is expected to meet and decide in its absolute discretion whether to issue a decree approving the sale of the Combinations to the highest bidders. The RFA provides that the Council of Ministers must either approve or decline to approve the sale of both Combinations (i.e., the Council of Ministers may not approve the sale of only one Combination). Once the winning bidders have been approved by the Council of Ministers, a confirmation letter will be sent to each winning bidder. After issuance of the Council of Ministers decree, each winning bidder is required to provide a performance bond (issued by a qualifying bank meeting criteria set by the HCP in the RFA) in the sum of 10% of its winning bid amount within 14 days of receipt of the confirmation letter. All relevant details regarding each proposed licensee entity are then to be provided to the HCP and the TRA, including the form of bylaws and the proposed capital structure. Such documents will be agreed between the HCP, the TRA and each winning bidder. Each winning bidder is required to incorporate the proposed licensee entity in the form of a Lebanese joint stock company (S.A.L.). The Republic of Lebanon will hold 1/3 of the issued share capital in such joint stock company. The Republic of Lebanon will undertake to sell these shares to Lebanese nationals via an initial public offering of shares ( IPO ) which would take place within a year of the incorporation of the relevant licensee. So long as the Republic of Lebanon or its designee holds at least 2% of the shares in a licensee, it will have the right to nominate and appoint one director of the licensee. Following the incorporation and registration of the relevant licensee, 40% of the winning bid amount must be paid to the HCP and shares representing 1/3 of the capital of the licensee are to be delivered to the Republic of Lebanon or its designee.

4 Upon satisfaction of all remaining conditions precedent set out in the RFA, the remaining 60% of the winning bid amount must be paid to the Republic of Lebanon, the TRA will issue the relevant license to the proposed licensee entity, and the HCP will transfer and deliver ownership of the acquired assets and assumed liabilities and contracts. The winning bidder must cause the prospective licensee entity to offer employment to all personnel of the relevant existing management company other than certain senior management executives. This offer must be for 18 months from the date of employment and must be on the same financial terms as existed between the employee and the relevant management company on the date of the offer, and the end of service indemnities in respect of each relevant employee will be borne by the existing management companies. However, there is no obligation to maintain any employee in the same position he or she occupied with the existing management company. 3. OVERVIEW OF AUCTION PROCESS The bidding process for the auctions will be as follows (a) (b) (c) (d) (e) (f) (g) (i) The auctions will take place in a live public session (with media and television invited) in Beirut on a single day on the same day that, and immediately after, the Council of Ministers announces its decision regarding the 0% or 10% revenue share. The auctions will be conducted by two auction officials, one from each of the HCP and the TRA. The determinations of the auction officials regarding the conduct of the auctions will be final and binding. The highest pre-auction bid submitted in its application by a qualifying applicant for a Combination (based on the revenue share percentage designated by the Council of Ministers) will be the opening bid for such Combination in the relevant auction. Further bidding will be conducted in rounds, alternating between each Combination unless otherwise jointly determined by the HCP and the TRA. In each bidding round for a Combination, qualifying applicants may submit a single bid in writing on a form to be provided by the auction officials and to be signed by the authorized representative of the qualifying applicant. The form will specify the identity of the bidder, the Combination to which the bid relates, the amount of the bid and the time at which it is signed. All bids must be a multiple of US$5 million. Following the submission of all bids in any given round, the auction officials will open such bids in the presence of the qualifying applicants and will announce the identity of each qualifying applicant and the amount of each submitted bid. The highest bid submitted by any qualifying applicant in a round will automatically be the opening bid in the next round for such Combination. In such next round, such qualifying applicant will be permitted, but will not be required, to submit a bid that is higher than this opening bid.

5 (j) (k) (l) (m) In each bidding round for each Combination, qualifying applicants who elect to participate must submit a bid that is at least US$25 million more than the opening bid in that round. Qualifying applicants who do not bid in a round will not thereafter be permitted to participate in further rounds of bidding for such Combination. The auction officials will keep a record of which qualifying applicants continue to be permitted to participate. Subject to paragraphs (f) and (j) above, qualifying applicants will be permitted to participate in each round of bidding regardless of the amount of their bids in previous rounds. Without prejudice to the right of the Auction Committee to designate the upcoming round as being the final round, the first bidding round for each Combination in which no bid other than the opening bid is submitted will close the bidding for such Combination and the qualifying applicant that submitted such bid will be the prospective winning bidder and the amount of such bid will be the prospective winning bid. If the highest bidder for one Combination is also the highest bidder for the other Combination, then such bidder will be allocated the Combination having the highest bid of the two. The second highest bidder for the remaining Combination will then become the prospective winning bidder for such remaining Combination. 4. PAYMENT MECHANICS 4.1 Composition As stated above, all parties who submit expressions of interest are required to make a non-refundable payment of US$50,000 to the TRA. Each application must include a bid bond in the sum of US$50,000,000, issued by a qualifying bank in the form attached as an appendix to the RFA. Once approved by the Council of Ministers, the winning bidder in respect of each Combination is then required to post a performance bond issued by a qualifying bank (again in the form attached as an appendix to the RFA) in an amount equal to 10% of the relevant winning bid amount. Following receipt of the performance bond, the HCP will arrange for the cancellation and return of the bid bond to the relevant winning bidder. In the case of each Combination, the next highest bid after that of the winning bidder will remain valid and binding for 180 days after the date of submission of the applications to allow for potential replacements of the winning bidders in case of subsequent disqualification or default. The winning bidder for each Combination must then incorporate the proposed licensee entity and 40% of the winning bid amount must be paid to an account designated by the HCP. In the closing of the acquisition of the relevant business and award of the relevant license, the remaining 60% of the winning bid amount must be paid to an account designated by the HCP. The Republic of Lebanon or its designee will receive free and clear title to fully paid shares of the prospective licensee entity representing one-third of all of the issued and

6 outstanding share capital of the licensee. The payments of the Winning Bid Amount will be subject to setoff, credit or similar arrangement as required to ensure that the Republic of Lebanon receives funds equal to the Winning Bid Amount less the economic value of the shares in the prospective licensee entity delivered to the Government The HCP and the TRA will jointly provide the details of the timing and mechanics of the payments and delivery of shares as described above. 4.2 Debt to equity ratio The licensee will be obligated to maintain a debt to equity ratio not exceeding 60/40 (i.e., where debt does not exceed 150% of equity) unless otherwise agreed by the Republic of Lebanon as a shareholder. This obligation will lapse on the earlier of 60 days after the completion of the IPO or twelve months from the licensee s incorporation. 5. IPO All of the shares to be held by the Republic of Lebanon or its designee in each of the prospective Licensee entities are intended to be sold in an IPO to be conducted by the HCP on the Beirut Stock Exchange within a year of incorporation of the relevant Licensee. If the IPO takes place between the incorporation of the prospective licensee entity and 30 days after the issuance of the relevant license, the price at which the shares are expected to be offered must be equal to the price paid for shares in the relevant licensee by the winning bidder, less sales commissions. After this period, the Republic of Lebanon will be free to set the offer price of the shares as it deems appropriate, but not below the price paid for similar shares by the winning bidder, less sales commissions. The Republic of Lebanon reserves the right in its sole discretion to amend these provisions relating to the offer price for the shares to be sold in any IPO, without any liability to the relevant Winning Bidder, the Licensee or any other party. The initial placement and ownership of these shares are expected to be restricted to Lebanese nationals. 6. REPRESENTATION The HCP shall be represented by its Secretary General and the TRA shall be represented by its Chairman. 7. GOVERNING LAW AND DISPUTE RESOLUTION The RFA, the acquisition documents and the licenses to be issued in connection with it are to be governed by and construed in accordance with the laws of the Republic of Lebanon. The competent courts of Lebanon will have exclusive jurisdiction in respect of any dispute arising out of or in connection with the RFA. * * * Dates specified in the RFA as requiring a decision of the Council of Ministers may be changed by the Council of Ministers in its absolute discretion. By approving this summary and the accompanying draft RFA, the Council of Ministers authorizes the HCP and the TRA to change other dates and other provisions of the RFA if they consider such changes appropriate to ensure an efficient and orderly process, provided that such changes do not result in a material change to the sequence of events and process as described in this summary.

7 SCHEDULE Date 02/11/2007 RFA published Timetable 06/11/2007 Access to online data room Event 30/11/2007 Draft license and acquisition documents made available 10/12/2007* Deadline for submitting questions 07/01/2008** Responses to questions published 21/01/2008 License and acquisition documents finalized 24/01/2008 Council of Ministers meeting to confirm the timetable for the opening of the sealed pre-auction bids and the Auction 25/01/2008 Last day for submission of expressions of interest 01/02/2008 Applications due date; online data room closes 18/02/2008 Qualifying applicants announced and pre-auction bids of nonqualifying applicants destroyed 21/02/2008 Pre-auction bids of qualifying applicants opened, amount of revenue share announced and auctions conducted 26/02/2008 Minister of Telecommunications recommendation issued 13/03/2008 Council of Ministers meeting to approve/disapprove sale 3 days after the sale decree 14 days after the confirmation letter 30 days after the confirmation letter 15 days of receipt of details regarding each Licensee entity 15 days of agreement on the bye-laws 7 days following the incorporation and registration of each Licensee entity Upon satisfaction of remaining conditions precedent Confirmation letter sent to each winning bidder Performance bond of 10% of winning bid amount to be posted All relevant details regarding each prospective licensee entity to be provided to the HCP and the TRA, including the form of bylaws and the proposed capital structure The HCP and the TRA to provide each winning bidder with comments and amendments (if any) to the form of bylaws and other documents provided by the winning bidder Winning bidders to incorporate each prospective licensee entity 40% of winning bid amount (less credit for value of shares delivered to the Republic of Lebanon or its designee) due Simultaneous closing: payment of remaining 60% of winning bid, delivery of shares representing 1/3 of the capital of each prospective Licensee entity delivered to the Republic of Lebanon or its designee, and delivery of control and ownership of assets and issuance of license * The HCP and the TRA may, in their absolute discretion, allow for the submission of further questions after this date. ** Responses may be published after this date if additional questions are permitted by the HCP and the TRA.