Wataniya Mobile did not meet launch date due to dispute over frequencies

A new Palestinian telecommunications company, Wataniya Mobile, failed to launch its service by 15 October, a date the company had set to begin operations. The problem is dispute over frequency allocation complicated by the Israeli military occupation and total control of the West Bank.

Wataniya has said that if the launch date is not met, it would sue the Palestinian Authority for costs. Various figures have been mentioned — at the low end is $140 million dollars (for licensing fees), and the higher end is about three times as much (including $270 million in infrastructure, and the salaries of some 200 people already working on staff).

A statement Wataniya posted on its website says that “WM’s shareholders have invested over US $270 million dollars in Palestine to provide state of the art service. In order to meet its October 15, 2009 planned launch date, WM has informed the Palestinian Ministry of Telecommunications and Information Technology (MTIT) that the necessary frequencies must be allocated by September 15, 2009. The MTIT has been further informed that WM must actively pursue financial remedies if the agreed minimum spectrum commitments are not kept within the planned launch schedule”.   This can be viewed here .

The Palestinian Authority has recently asked the UN’s International Telecommunications Union (ITU) in Geneva to help sort out the frequency dispute with Israel.   Israel is apparently pinning the blame on the Palestinians — but for what?

Israel is now agreeing to release only 3.8 MHz to Wataniya, but it Wataniya expected more. Freelance reporter Ashley Bates wrote in Haaretz that “This is less than the 4.8 MHz that Wataniya was promised in a complicated and bitterly disputed contract brokered by former British prime minister Tony Blair and signed by Israel and the PA in July of 2008. Both sides agree that Wataniya was promised 4.8 MHz, but Israeli officials insist this allotment was conditioned upon unnamed commitments that the PA has not fulfilled”.

Bates has a blog devoted to this topic, here.

In her blog reporting, Bates indicates that Israel has been expecting the sole existing Palestinian mobile phone company, Jawwal, to share frequencies with Wataniya.

So the two competing companies — the existing Jawwal, and the as-yet-unlaunched Wataniya — are being blamed for not agreeing to share?

Bates suggests that that Suleiman M. Zuhairy, deputy minister at the Palestinian Ministry of Telecom and Information Technology, believes that this is a main problem: “It is not an Israeli problem how the Palestinian side will manage these frequencies … The Israelis shouldn’t interfere between Jawwal and Wataniya. It is a Palestinian competition. We didn’t interfere…[with] any Israeli company.” And Bates reports that “Zuhairy also rejected Schubert’s comment that the Palestinians had an internal problem that they needed to resolve before the frequencies could be released. ‘The only one thing they are trying to hide behind is that we have to [make a sharing arrangement] between Orange, Jawwal and Wataniya’, he said. ‘Jawwal is a company and Wataniya is another company. [Jawwal] has the right not to share frequencies’.”    Bates’ account of her conversation with Zuhairy is posted here.

The majority owner of Wataniya is Qatar Telecom [through its subsidiary, Wataniya Telecom of Kuwait], with 57% of the company.  The Palestine Investment Fund (PIF) — which was formed to hold many of the assets accumulated by the late Palestinian leader Yasser Arafat — owns 43 percent, according to the Wataniya website here.

Paltel has apparently now been bought by a Kuwaiti company, Zain, a competitor of the Qatari QTel company which is majority owner of Wataniya.

The spectre of the Palestine Investment Company suing the Palestinian Authority for damages is extraordinary … particularly in light of the Reuters stories last April about U.S. loan guarantees (in the amount of $16 million — a fraction of what is at stake) that were reportedly given for Wataniya.

Reuters reported at the time that “Mohammad Mustafa, Abbas’s chief economic adviser and chairman of both the PIF and Wataniya Palestine, said the $16 million in loan guarantees for Wataniya were justified by the global credit crunch and the company’s potential to bolster the Palestinian economy.  He said plenty of guarantees remained to boost smaller businesses, as intended by programme sponsors”.

This Reuters report added that “Support from the loan guarantee programme came from the U.S.-based Aspen Institute, whose Middle East Strategy Group brought together prominent Americans, such as former Secretary of State Madeleine Albright and Sen. Dianne Feinstein, with Palestinian business leaders, including PIF directors … Feinstein pushed through legislation to authorise the programme, funded by the U.S. government’s Overseas Private Investment Corporation (OPIC) and the PIF, and overseen by the Aspen-linked Middle East Investment Initiative”.

Reuters noted that “[Palestinian] President [Mahmoud] Abbas’s elder son, Yasser, was also part of the Aspen Institute panel”.

[The Aspen Institute is linked not only the Middle East Strategy Group, but also to the Middle East Investment Institute and the U.S. Palestinian Partnership. The links, relationships, and functions of these bodies are not entirely clear. The Middle East Strategy Group dates to 2004, while the latter two seem to have been launched in late 2007 during the flush of the Annapolis process.]

This seems to be the only link between Yasser Abbas and the Wataniya deal, despite suggestion and innuendo in many media reports, following a recent Israeli news story reporting that Israeli officials were holding up allocation of telecommunication frequencies to the Palestinian Authority in exchange for some sort of guarantee that the PA would drop moves to ask the International Criminal Court to investigate the actions of Israeli military officers and government officials against Palestinians, most recently during the Israeli military’s Operation Cast Lead last winter in Gaza.

A committee of Palestinian lawyers representing both Yasser Abbas and his younger brother, Tareq, recently told journalists at a press conference in Ramallah that neither man had anything whatsoever to do with the Wataniya deal, “either near or far”.

UPDATE: Ma’an News Agency reported on Sunday, in an indication of the importance and sensitivity that this matter has assumed in Palestinian circles, that Palestinian President Mahmoud Abbas said at a meeting of the newly-elected Fatah Revolutionary Council in Ramallah that “With regard to the new Palestinian mobile provider, Al-Wataniya, Abbas said the company was licensed by the Palestinian minister of communications, Al-Khudari, during the former Haniyeh government, and that the Palestinian Authority has no shares in that company”. This report is posted here.

Taken at face value, that statement clarifies the official argument that the Palestine Investment Fund, created in 2002, and a 43 percent shareholder in Wataniya — and headed by President Abbas’ chief economic adviser Mohammad Mustafa — is somehow being identified as NOT part of the Palestinian Authority.

If the Palestinian Authority is sued, it will apparently try to get compensation from Israel — and, if that fails, it will turn to donors. A Reuters story from Kuwait on 23 August reports that “Wataniya Mobile said it had been provided with frequencies that fall below the minimum needed to launch the network. ‘In the event that minimum radio spectrum is not allocated to meet the launch schedule, WM must pursue remedies which may include demands for refund of its license fee payment and other damages’, the statement said … Israel says it has limited available frequencies, a large number of which are reserved for its military … Mohammed Mustafa, president of the Palestinian Investment Fund, said despite the deadline set by Wataniya there was still hope that the United States and the European Union, key backers of the project, would sway Israel to issue all the frequencies.” This same Reuters story adds that “Palestinian minister of communications, Mashhour Abu Daqqa, told Reuters the Palestinian Authority would ask international powers to press Israel to cover financial costs that would result from a possible Wataniya pull-out from the deal … He added that should the deal fall apart and Israel refuse to cover costs, the cash-strapped Palestinian Authority would have no choice but to ask donors to compensate Wataniya“. This Reuters report is posted here.

However, the donors — or, at least one of them, the U.S. — has already contributed something. In a story last April, Reuters said that “[I]n December, programme administrators expedited approval of what they termed two ‘exceptionally large loans totalling $16 million to support Wataniya Palestine, according to a monthly progress report. An official who helps administer the loan programme, speaking on condition of anonymity, said the decision to support Wataniya Palestine was made quickly after Palestinian banks warned that they might not be able to provide loans. OPIC spokesman Timothy Harwood said the agency ‘concluded that by virtue of its significant job creation potential — more than 2,000 jobs are expected to be created through the project — it was a worthwhile investment, and consistent with OPIC’s mission to support economic development in emerging markets’.”

Reuters also reported that “Some Palestinian officials and small businessmen questioned why a company co-owned by the PIF and Kuwait’s National Mobile Telecommunications Co., a unit of Qatar Telecommunications Co. needed U.S. help.  The PIF reported a $260 million profit in 2007. Kuwait’s Wataniya posted more than $280 million in profit in 2008. ‘I don’t think getting a bank loan was a problem’, said one top Palestinian official involved in banking regulation”.

But, Reuters noted, “[The PIF’s Dr. Mohammad] Mustafa said the guarantees were needed to provide comfort to local banks, which the PIF wanted involved in the deal. ‘I guess these guys were scared’, Mustafa said, citing the credit crunch, war in the Gaza Strip and the uncertainty over when Israel may release radio frequencies for the new firm.” This Reuters report is posted here.

Another Reuters report in the same series said that “Set up in 2002, the PIF under then-finance minister Fayyad consolidated varied and secretive holdings accumulated under Abbas’s predecessor, Yasser Arafat, and posted the accounts publicly for Palestinians and investors to see. The PIF at the time sought to put a distance between the PA and business to stem talk of corruption and nepotism under Arafat’s Fatah faction. That talk aided the rise of Hamas … Changes at the PIF followed Fayyad’s resignation in late 2005 and Hamas’s parliamentary election victory. ‘The policy, the board — everything changed’, said a former director … Mustafa, a World Bank veteran, was put in charge. Board seats for the finance and economy ministers were scrapped. The investment strategy also changed. Under Fayyad, the PIF sold off stakes in what were deemed to be ‘mature’ sectors, including telecoms, a shift backed by the United States to boost public confidence in the PA … Under Mustafa, the PIF sold off smaller holdings and some big foreign assets. Mustafa then made large investments at home, from real estate to a 43 percent stake in Wataniya Palestine, a mobile phone venture to challenge a decade-old PalTel monopoly. The PIF said its involvement was needed because the private sector was too weak or too risk averse … Full breakdowns of assets are no longer published publicly — part of efforts, Mustafa said, to limit the risk of holdings being seized in suits against the Palestinian Authority (PA). Mustafa said the fund’s disclosure policy was under review, and that measures were in place to avoid conflicts of interest. Abbas has named a 30-member ‘general assembly’ to oversee key decisions and the fund’s books are reviewed by the PA comptroller and shared with international institutions … Some PIF directors are cool to the idea of the government, and Fayyad, returning, officials say. Diplomats cite tensions over how much of the PIF’s profits are passed to the PA. Fayyad and board members have clashed in the past over assets being sold or used as collateral for loans, and over subsidies. Mustafa said the PIF paid nearly $650 million to the PA over the last five years [n.b. the PIF helped cover the shortfall when donors cut off funding after Hamas won parliamentary elections in January 2006 and headed the next government] without getting any reinvestment in return“. This report can be read here.

Jawwal operates in both the West Bank and in Gaza, while Wataniya has set up infrastructure only in the West Bank. The Israeli Minister of Defense is the ultimate authority in the West Bank, which Israel occupied in the June 1967 war. The Palestinian Authority has control — which is not complete — only in the major West Bank cities, and not in the countryside which is now dotted with Israeli settlements.

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