Kalimat considers foreign approaches

Iraqi fixed line operator ready to sell substantial stake to foreign investors looking for foothold in country.

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By  Reuters Published  August 15, 2007

Iraqi fixed-line phone company Kalimat Telecom is considering approaches from foreign investors looking for a foothold in the country, the company's Kuwaiti parent said.

Kalimat, which won one of Iraq's three national licences last year, expects to take advantage of the present low level of fixed-line connections as proportion of the population of about 4 %.

Kalimat, which is setting up a wireless local loop network, has been approached by foreign investors and would be willing to sell a "substantial stake", said Hassan Abdul Razek, a director of Kalimat's owner, Trade Links Middle East.

The technology uses wireless instead of traditional copper cables to connect home phones to local exchanges.

"If we receive an offer that satisfies investors and maintains the company commitment to the Iraqi community, we will be eager to discuss it," Razek told Reuters from Kuwait on Tuesday, declining to name any suitors.

Middle Eastern companies are competing for three mobile licences that the Iraqi government will auction in Amman from Thursday. The 15-year licences replace three short-term contracts awarded soon after the U.S.-led invasion of Iraq in 2003 that toppled Saddam Hussein's regime.

The number of mobile users surged to 5 million at the end of 2006 from virtually nothing three years earlier because the fixed-line network was hit by sanctions after Iraq's invasion of Kuwait in 1990 and barely survived bombing during the 2003 war.

"Iraq has a history of poor fixed-line infrastructure, which barely supports 1 million subscribers," said Razek. "Any service provider with a reasonably priced offering can expect good growth."

State-owned Iraqi Telephone & Postal Company and a consortium led by Jordan's Munir Sukhian Group also have national licences for wireless local loop networks in Iraq, a country with 26 million people and the world's third largest oil reserves. Three other operators have regional licences.

Kalimat paid a $20 million fee and signed a $5 million performance bond for its 10-year licence. The company plans to invest $700 million in its first six years of operations, Razek said.

Last month it awarded a $275 million infrastructure contract to Chinese company Huawei Technologies. Razek said telecom infrastructure has rarely been targeted by insurgents, who have attacked oil facilities and reconstruction projects in a campaign to toppled the U.S.-backed government in Baghdad.

Kalimat expects to make a return on its investment in four years and sign up 1.2 million customers by 2013, when Iraq's wireless loop market will have a penetration rate of about 60 %, he said.

Fixed-line penetration is about 4 %, according to telecom's regulator the Communication and Media Commission, compared with about 30 % for mobile phones.

Kalimat intends to sell shares in an initial public offering in about four years, Razek said.

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