Iraq eyes offering new cellphone licenses by fall (21/07/05)

Iraq will offer several new licenses to run cellular telephone networks in the next three months, and a government-backed local consortium will join the bidding, senior Iraqi telecoms officials said Thursday.

International companies will be invited to bid on the licenses, which are meant to replace three temporary licenses awarded in 2003 and expiring in December.

The expected entry of a consortium led by state-owned Iraqi Telecommunications & Post Co. - which will hold a 15 per cent to 20 per cent stake in partnership with private Iraqi investors - would mark the first time a domestic group has bid for a network license, Iraqi Minister of Communications Jowan Masum said in an interview on the sidelines of an industry conference.

The tender will likely be opened in August, she said. Later Siyamend Othman, the head of the National Communications and Media Commission - Iraq's regulatory body - said the tender was more likely to be announced in late September or early October.

"Hopefully, that will mean we'll be ready to award the new licenses by the due date," Othman told reporters, referring to the December expiration of the current licenses.

Iraq plans to offer two to five licenses to operate cellular telephone networks in the country for 15 years with the potential to renew for another five. The winning companies are expected to start operations in December.

All three of the current operators - Egypt's Orascom Telecom Holdings (ORTE.CI), Kuwait's Mobile Telecommunications Co. (TELE.KW) and AsiaCell, part of Kuwait's Wataniya - are expected to bid for the new licenses. Othman said interest in the tender is high.

"All the principle players that are known have been approaching us today," he said, but declined to name any companies.

Othman said he and the minister were in London as part of detailed consultations with industry figures ahead of the tender. Price Waterhouse Coopers will be handling the bidding and issuing process, he said.

Ali al-Dahwi, chief executive of MTC's Iraqi unit, Atheer Telecom, said in a briefing that telecommunications is the fastest growing sector in Iraq, one of the most significant markets for MTC.

"Mobile telephones are the only thing that is working well in Iraq today," al-Dahwi said. By the end of 2005, he said, the number of Iraqi subscribers would reach half the number of subscribers in Egypt - a far more developed market and wealthier and more stable country.

The Iraqi Ministry of Communications in 2003 issued licenses for Orascom to operate in central Iraq, MTC in southern Iraq and AsiaCell to operate in the north of the country.

Orascom's Iraq unit, Iraqna, said it has attracted 1.2 million subscribers since it started operations in early 2004 and aims to reach 1.5 million by the end of 2005.

Al-Dahwi said Atheer Telecom has over 700,000 customers and aims to reach 1.5 million Iraqi subscribers by year-end. AsiaCell also aims to have 1.5 million customers by the end of 2005.

The three companies together will have invested in excess of $1.2 billion by the end of this year, and all have expanded coverage outside their original regions.

Despite the rosy forecasts, the worsening security situation isn't making business any easier. Although al-Dahwi declined to say what amounts the company spent on security to protect staff, towers, generators and fuel supplies, he said it was "significant".

But Othman said the security threat to mobile phone operators isn't as great as the danger for companies involved in rebuilding infrastructure, roads and housing.

"There must be money in it if they're all still hanging around," he said.

Unlike the original two-year licenses, the new ones will be national in scope, Othman said. The government hopes by using auctions it can raise more money than it would with sealed bids. The NCMC hasn't decided exactly how many licenses will be up for grabs.

"Logic says between two to five licenses, but it depends on the philosophy - whether you want to limit the number of companies and increase the license fee or expand competitions and get less fees," he said.

Meanwhile, the density of fixed-line use in Iraq is among the lowest in the world - at only three per cent of the country's 25 million population.

The ministry has already spent around $100 million since the war, including repairs to the country's fiber optic network that was damaged during the fighting and expanding the flexibility of the systems so that calls don't have to be routed through Baghdad.

Masum said the ministry was to spend another $155 million on telecoms infrastructure for basic telephony and internet.

Later this year, the ministry will issue two to three tenders for licenses to operate wireless fixed line networks.

Selina Williams

Source: Dow Jones Newswires