RAMALLAH, West Bank, June 5 (Adam Entous, Mohammed Assadi, Reuters) - The company awarded the license by the Palestinian Authority to build a new mobile phone network has demanded its investment back unless Israel releases promised radio frequencies, officials said on Friday.
The possible collapse of the Wataniya Palestine mobile phone deal, set up to challenge PalTel's longstanding monopoly in the local market, could undercut future foreign direct investment in the Palestinian economy, Palestinian and Western officials said.
Wataniya Palestine is owned by Kuwait's National Mobile Telecommunications Co (Wataniya), a unit of Qatar Telecommunications Co (Qtel), as well as a holding company for Palestinian public assets.
Its chairman is Palestinian President Mahmoud Abbas's chief economic adviser. The U.S. government and World Bank have given backing to Wataniya Palestine and Middle East envoy Tony Blair has pressed Israel to release the frequencies, as a way to jumpstart the Palestinian economy and boost support for Abbas and his Western-backed government in the Israeli-occupied West Bank.
Wataniya Palestine signed a license agreement with the Palestinian Authority in 2007 after bidding 251 million Jordanian dinars ($354 million) to build and operate a new network in a challenge to Palestine Telecommunications Co (PalTel).
Mobile Telecommunications Co (Zain), Kuwait's largest mobile operator, took a majority stake in PalTel earlier this month.
They (Wataniya Palestine) are demanding their money back, plus another $200 million in expenses for installing some equipment, running costs and other things, Palestinian Communications Minister Mashhour Abu Daqqa told Reuters.
How can we afford paying all of this at a time we are struggling to pay salaries? he added.
Abu Daqqa and Western diplomats said Wataniya Palestine made the demand in a letter sent on Thursday to the Palestinian government headed by Prime Minister Salam Fayyad.
Wataniya Palestine had no immediate comment.
Fayyad's government has received only a fraction of the $1.5 billion in donor assistance needed to meet its budget in 2009, making it difficult to cover its monthly wage bill, the International Monetary Fund warned earlier this week. To offset the shortfall in donor funds, Fayyad's government has borrowed $530 million from private banks, but it is close to reaching the borrowing limit, the IMF said.
Western diplomats said Wataniya Palestine's request for reimbursement was partly a pressure tactic to try to spur Israel to release the frequencies.
Abu Daqqa said Fayyad's government has asked Blair and the United States to intervene.
Israel and the Palestinian government signed an agreement last year to release the frequencies. But Wataniya Palestine said it has yet to receive all of them, delaying the launch of commercial services in the West Bank.
The company warned Blair in a letter last month that Western-backed loans to build the network were in jeopardy because it lacked frequencies.
An arm of the World Bank, the International Finance Corporation (IFC), said in a separate letter it was concerned about the company's ability to meet its obligations. (Editing by David Holmes) (For blogs and links on Israeli politics and other Israeli and Palestinian news, go to http://blogs.reuters.com/axismundi)