Permanent licensing in Iraq afoot

There have been a series of false dawns with respect to the permanent licensing of mobile operators in Iraq, though it appears that at last concrete moves are being made in this direction.

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By  Tawanda Chihota Published  August 8, 2007

There have been a series of false dawns with respect to the permanent licensing of mobile operators in Iraq, though it appears that at last concrete moves are being made in this direction. Orascom Telecom and MTC have been resolute in their desire to maintain their positions in the market, given the human and capital investments that have been made since the operators were first licensed in December 2003, and appear well placed to see their temporary licences commuted to permanent ones.

Matters with respect to Iraq's third mobile operator are not as well defined. It is interesting that Qtel recently issued a statement that the company would participate in the Iraq licence auction - scheduled to take place on August 16 and 17 - together with its Iraqi affiliate Asiacell. What makes this cooperation interesting is that for many months, Asiacell and Wataniya International, the Kuwait operator that was acquired by Qtel in March this year, have been involved in a dispute regarding Wataniya's continued participation in the Iraqi operator.

An arbitration hearing was ultimately sought in order resolve the issue, and try as CommsMEA has to ascertain the initial grounds of the dispute between the two shareholders or at what point the shareholders now find themselves, few details are available. Perhaps Qtel's statement that it plans to bid for a licence in partnership with Asiacell means the issue is resolved, and the shareholders now look to a common future ahead.

I last commented that I felt a greenfield investment in Iraq's telecoms sector would be a difficult proposition to sell to a wide investor base, given the continued high levels of security instability in the country. I had commented on this with respect to the planned development and launch of wireless local loop services by Kalimat Telecom, an operator that is planning on investing US$1 billion in the nationwide network over 15 years.

My view with respect to the investment case for mobile operators in Iraq is very different. In my opinion, it is all but a foregone conclusion that the three incumbent mobile operators will have their licences converted into permanent concessions given the tangible and intangible investments they have made in their respective networks over the past three and a half years.

The international pedigree of Orascom Telecom and MTC Group would make it unlikely that stronger operational partners could enter the market and do a better job than they already have. Qtel, while still learning the ways of international investment and operation, has the desired deep pockets and aspiration to be of value in Iraqi telecoms market and, as such, ought to be a convincing contender for the extension of its licence.

Given the high margins and strong cash flows generated by all three mobile operators in Iraq, it is clear that the opportunity to enter the market is generally viewed as a positive one, hence the reported interest from no fewer than 10 international bidders.

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