Iraq announces mobile winners

Licences were awarded to MTC, Asiacell and Korek on Friday in a $3.75bn auction in the Jordanian capital.

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By  Reuters Published  August 18, 2007

Iraq sold three mobile phone licences for $3.75 billion to Kuwait's Mobile Telecommunications Co (MTC), Asiacell and Korek on Friday, in a country that relies on cellphones after war and sanctions hit landlines.

The three firms, which already run networks in the war-torn country, made the highest bids in an auction in the Jordanian capital that began on Thursday.

"To get the best return from the auction in such circumstances is a great vote of confidence in the Iraqi economy," Iraqi Finance Minister Bayan Jabor told reporters in Amman.

The winners will also share 18 % of the revenues with the government.
TurkCell and Egypt's Orascom Telecom had also bid for licences but dropped out of the race for one of the few sectors to thrive amid Iraq's instability and crumbling infrastructure.

The fixed-line network was hit by sanctions after Iraq's invasion of Kuwait in 1990 and by bombing during the U.S.-led invasion in 2003. Less than 4 % of Iraqis have landlines.

Orascom's withdrawal appeared to be a major upset as the operator was the first to provide a full mobile phone service in Baghdad after the 2003 invasion, through its Iraqna subsidiary.

The company had invested almost $300 million in Iraq since it first won the rights to operate there in October 2003. Iraqna's Web site says it has around 3 million subscribers, representing just over a third of the market.

"Since they were first to establish in Iraq, we were surprised by Iraqna's pullout from the auction after bidding reached $1.25 billion," Jabor said.

The 15-year licences replace three short-term contracts awarded soon after the invasion.

MTC began in the south of Iraq through its Atheer network. Asiacell is 40-% owned by Qatar Telecommunications Co through Kuwait-based National Mobile Telecommunications Co., which it took over in March.

Asiacell began operating in the Kurdish north in 1999. Korek Telecom is based in the city of Irbil in Iraqi Kurdistan.

Iraqi mobile use rose to 8 million out of a population of 26 million at the end of 2006, from virtually nothing three years earlier, according to officials.

GOVERNMENT SHARE

Officials said the auction, which had been delayed due to Iraq's security problems, is part of a drive to increase revenues and improve services in a market that is viewed as underpenetrated.

They also said the auction system was designed to counter widespread criticism of a lack of accountability that has plagued Iraqi administrations since the invasion.

The tendering process took a year and half and left five mainly Middle Eastern bidders in the running out of the 11 firms originally short-listed.

Jabor told Reuters earlier that the winning firms have to offer 45 % of their equity to the Iraqi public within four years as part of a drive by the authorities to widen public ownership of assets.

The finance ministry will levy 15 % tax on the profits of the mobile companies on top of the revenue-sharing, he added.

There is a widespread belief that the original licences were offered too cheaply to existing operators.

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