Wataniya delays its launch- AGAIN

So the deadline has passed and Wataniya is still holding out hope for a breakthrough. Yesterday I wrote a breaking news article for Ha'aretz about this now very familiar development. Here's the link and here's the text of the article...

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Israeli leaders have highlighted loosened security restrictions, an economic growth rate of 7 percent, and the construction of state-of-the art shopping malls and cinemas in the West Bank as an indication of what Gaza citizens could enjoy— if only Hamas chose to abandon terrorism.

However, the struggles of a multi-national cellular company elucidate the political roadblocks still stifling businesses in the West Bank. On Oct. 15, Palestine’s Wataniya Mobile once again did not launch as planned because it has not received its promised 4.8 MHz of airwave frequency spectrum.

Wataniya hoped to launch last April, but unwittingly became a political pawn in clashes between Israel and the PA. Tensions piqued last week when the Israeli government, which controls the airwaves in the Palestinian Territories, threatened to withhold Wataniya’s spectrum indefinitely unless the PA dropped its demand for IDF officers to be tried at the International Criminal Court. This followed the publication of the controversial Goldstone report, which accuses both Israel and Hamas militants of war crimes.

“[Wataniya has] nothing to do with the Goldstone report—nothing at all,” said Allan Richardson, the Scottish CEO of Wataniya. “We’ve been trying for two and a half years to get this spectrum….We’re just trying to build a network that’s competitive and gives the Palestinian people a choice. That’s it.”

Richardson previously started mobile networks in post-war Iraq and Afghanistan and said in a May 2009 interview that “the obstacles [Wataniya is] suffering from [in the West Bank] are obstacles you’ll never get anywhere else in the world.”

The Israeli government has suddenly backed away from its threat not to give the PA any spectrum for Wataniya and has resumed its position announced last month that it would provide 3.8 MHz. This is less than the 4.8 MHz that Wataniya was promised in a complicated and bitterly disputed contract brokered by 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 representatives insist that this allotment was conditioned upon unnamed commitments that the PA has not fulfilled.

In an August press release, Wataniya’s board of directors set Oct. 15 as the final launch deadline and said they would demand compensation from the cash-strapped PA, whom Wataniya paid for its license, if the 4.8 MHz was not received. The PA, in turn, announced its plans to demand compensation from Israel if it failed to follow through on its promise to provide the spectrum.

“3.8 MHz will not support enough subscribers and will not allow us to deliver the quality we need to get into this market,” Richardson said in an Oct. 16 interview. “The PA had an agreement with the Israeli government for 4.8 MHz of spectrum. Based on that agreement, we made our investment.”

He added, “To be quite honest, we haven’t got a lawyer yet….The worst case scenario is we don’t launch. But I don’t see that happening. I’m an optimist. I believe we will launch.”

Richardson’s contention that 3.8 MHz is not enough to operate a viable cellular network is shared by many telecom experts. Most cellular carriers worldwide operate on at least 10 MHz of spectrum, according to Derek Kerton, a principal analyst with Kerton Group, a telecommunications consulting company.

In 1996, Israel allotted 4.8 MHz to the PA for use by Jawwal, the sole Palestinian cellular provider that now serves 1.5 million subscribers. Jawwal’s parent company, Zain Palestine (formerly Paltel Group), constitutes about 50 percent of the Palestinian stock exchange. Despite this financial success, Jawwal stopped selling SIM cards on multiple occasions because it didn’t have sufficient frequency spectrum to support new customers, according to Jawwal’s CEO Ammar Aker.

By contrast, Israel’s three major cellular companies, which support a larger and denser population of subscribers, have between 20 and 46 MHz of spectrum and are generally satisfied with their allotment, according to company reports.

In addition to its undelivered spectrum, Wataniya has waited more than six months to have some of its equipment cleared through Israeli customs. Jawwal has experienced similar challenges. The average customs holdup for Jawwal base stations and towers is six to 18 months, and some of Jawwal's switch equipment has been held in customs since 2005, according to Aker. Israel recently prohibited Jawwal from importing microcells used to prevent the dropped calls for which Jawwal has become notorious.

Palestinian-American businessman Sam Bahour, who oversaw the establishment of the first Western-style shopping mall in the West Bank, said that Wataniya’s struggles are “a clear example of… Israel, the occupier, continuing to micromanage the Palestinian economy, [which is] the core reason why the Palestinian economy is stunned.”

Tony Blair has not weighed in publically on the details of the political dispute over Wataniya’s frequency allotment, but said through a spokesperson in a June 3 statement that the release of telecommunications frequency was “an important part of the set of [Mr. Blair’s] understandings with the Israelis.” Blair has pressed Israel to release all 4.8 MHz of frequency, arguing that this will bolster the moderate government of Mahmoud Abbas and grow the Palestinian economy.

The impact of Wataniya on the Palestinian economy would likely be powerful and lasting. The competition posed by Wataniya could improve the quality and cost of Palestinians’ phone service. Richardson reports that about 20,000 have already registered to receive Wataniya numbers. While Wataniya currently has 250 employees, the company predicts it would create more than 2000 direct and indirect West Bank jobs after its launch.

However, Wataniya’s continued paralysis at the whims of political battles could jeopardize the West Bank’s fragile growth and scare off future investors. Bahour said that these investors are “willing and ready to build a true Palestinian economy the second Israel ends its military occupation.”

Nati Schubert, senior deputy director general of spectrum management at the Israeli Ministry of Communications, said that when Wataniya is still in its launching phase, 3.8 MHz should be “enough.” He insisted that Israel has committed to give the PA 4.8 MHz “over time.”

“Wataniya is good for Israel. It’s a win-win situation,” Schubert said. “Israel losses [if Wataniya fails] because [Israel] wishes to improve the relations with the PA first by improving the commercial situation.”

It's Wataniya's Final Deadline Day...

But it looks like the waiting will continue until tomorrow.

I spoke with Allan Richardson, CEO of Wataniya, at 9 a.m. Palestine time for about 45 seconds today, Oct. 15. He sounded busy and somewhat chipper, but declined to comment on whether he thought Wataniya would receive 4.8 MHz by the end of today.

“We have a number of meetings going on today and we’re not in a position to say anything right now,” he said. “But if you call me back tomorrow, I should be able to tell you exactly what’s going to happen.”

While both sides have been ramping up dialogues behind the scenes, there have not yet been any public indications of progress. Last week, a Reuters article reported that the Palestinian Authority has sought assistance from the International Telecommunication Union, which is responsible for defining and adopting worldwide telecom standards.

The public response from the ITU doesn’t inspire much hope for a breakthrough. The ITU said only that it had received the Palestinian request and “asked both parties to cooperate.”

Israel Threatens to Halt Wataniya's Launch Unless PA Drops Demands for War Crimes Inquiry

The Sept. 15 deadline passed without any headway, and Wataniya Palestine has still been allotted only 3.8 MHz of the 4.8 MHz of frequency spectrum it was promised. Nevertheless, the company’s CEO, Allan Richardson, is forging ahead with plans to launch mobile phone operations on Oct. 15, assuming that the Israeli government allots 4.8 MHz by this time. In a Sept. 30 email, Richardson wrote:

“Right now there is no major movement on the spectrum issue. There is a lot of activity of a political nature at a high level in the background. My focus right now is to get the company ready for launch by mid October and we are on target. We have 250 employees + vendors working incredibly hard to get this company ready for launch. When I have something more for you I will let you know.”

Richardson declined to comment on a controversial story recently published in Ha’aretz, which reports that the Palestinian Authority has called on the International Court to investigate "war crimes" allegedly committed by the IDF during last winter’s Gaza War. In response, Israel said that it would not allow Wataniya to operate unless the Palestinian Authority drops its demands for a war crimes inquiry.

While they blame each other for this debacle, my sources on both sides agree that the failure of the Wataniya project would be catastrophic for the West Bank economy. As a multi-national company with more than $300 million invested in the West Bank, Wataniya's failure could scare off future investors, not to mention cost Palestinians more than 2000 jobs. It could also be a cataclysmic financial blow to the Palestinian Authority, which Wataniya would invariably sue for at least $300 million in damages.

Most worrisome is the reality that Wataniya’s failure could derail the West Bank’s surprisingly positive economic growth as well as behind-the-scenes progress in peace negotiations. In the past two years, state-of-the-art shopping malls and movie theatres have been constructed and Israeli-imposed security restrictions have been lifted. Many western leaders, including Israeli ambassador to the United States Michael Oren, have publicized this prosperity as an example of “economic peace” and an indication of what Gaza citizens could enjoy, if only their leadership decided to abandon terrorism.

But all of this growth hinges on the confidence of the investment community. In a Sept. 4 email exchange, Palestinian-American entrepreneur and businessman Sam Bahour, who lives in the West Bank and wrote a recent editorial in the WSJ, said the following:

“[The Wataniya situation] is a clear example of… Israel (the occupier) continuing to micro manage the Palestinian economy, the core reason why the Palestinian economy is stunned…The investment community, in Palestine and abroad, is able, willing and ready to build a true Palestinian economy the second Israel ends its military occupation.”

I’m currently pitching the story of this ongoing controversy to major U.S. newspapers, and hope to publish the story after Wataniya’s planned Oct. 15 launch date. Stay tuned…