"Our investment was based on a licence and to meet that license we need 4.8MGH of spectrum. We got an undertaking by both the governments of Israel and the Palestinian Authority to provide that 4.8 spectrum," Allan Richardson, the chief executive officer of Wataniya, told Al Jazeera.

"From a business perspective, if we don’t get that, we won’t meet our business objectives."

'Frequencies allocated'

But the Israeli ministry of communication the criticisms saying that the frequencies were sufficient for the the planned network.

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"The ministry of communications and the Israeli government allocated frequencies to the Palestinian phone company Wataniya, as required," it said in a statement to Al Jazeera.

"We believe that at present, and to start the operations of the company, the allocation of 3.8 MHz is enough by all opinions. In the future the government of Israel, will expand the allocation of frequencies to 4.8 MHz, as it has promised."

Under a deal signed between Israel and the Palestinian Authority in July 2008 the required frequencies should have been available by March.

The plans for the new operator have been backed by the so-called Quartet of Middle East negotiators, which includes the United States, the United Nations, the European Union and Russia.

Tony Blair, the envoy for the Quartet, recently warned that the dispute not only threatened the future of the project, but also the prospects for foreign investment in the West Bank and Gaza Strip. 

'Poverty and disintegration'

According to a UN trade and development report released earlier this week, the Palestinian economy lost ground for the ninth year in a row in 2008, posting two per cent growth, despite extensive efforts by the Palestinian Authority and $1.9bn in donor support.

"The devastation visited upon the occupied Gaza Strip and its economy has plunged its 1.5 million inhabitants into depths of poverty and disintegration unknown for generations," it said.

"The blockade it has endured has isolated it from the rest of the occupied Palestinian territory and the world."

The high poverty rate among Palestninians has continued to deepen and the trade deficit as a ration of gross domestic product (GDP) has reached an all-time high of 79 per cent.

Binyamin Netanyahu, the Israeli prime minister, has repeatedly stressed the need for "economic peace" with the Palestinians as talks over political issues have faltered amid anger over last year's war on the Gaza Strip and Israel's refusal to completely halt settlement building.