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The telecom sector in Iraq has witnessed enormous growth over the past few years, but with security still a problem and operators voicing concerns about an uncertain regulatory regime, maintaining growth could be a challenge.

Tags: AsiaCell TelecommununicationsIraqKorek TelecomMotorola IncorporationZain - Iraq
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By  George Bevir Published  November 10, 2009 Communications Middle East & Africa Logo

A word that is often associated with the telecom sector in Iraq is "potential", and although it is true that there is still room for plenty of further growth, such a description perhaps overlooks the considerable gains that have already been made. The Middle East's telecom majors that lack a presence in the country are keen to expand into Iraq, and for those that already have a presence it is an important market and considerable source of revenue.

The market leader in the mobile sector in Iraq is Zain, with just over 10.1 million customers, according to the operator's last set of results. That figure is up from 7.9 million during the first half of last year, an increase of 28%. Iraq is an important market for the Kuwait-based telco as it provides 16% of Zain's total revenue.

Rival Asiacell is 30% owned by Qatar-based Qtel and it plays a similar role in the fortunes of the Qatar-based group; during the first half of the year Asiacell provided 15.8% of Qtel's total revenue, behind only Qtel's domestic operation in Qatar and recent-acquisition Indosat.

Like Asiacell, Korek began life in the north of the country. As the third largest operator by subscriber numbers, Korek says it is "committed to providing the best mobile telephony products and services to Iraqi Kurdistan and to the whole Iraq". It describes its coverage north of Kirkuk and to the east of Mosul as "high", and the service 100 miles south east of Kirkuk as "variable". This is set to improve, the operator says, with plans to invest US$100 million to expand its mobile network across the country with the aim of increasing subscribers to four million over the next few years. Last year, it was announced that Asiacell would invest $1 billion in a network expansion drive, and Mai Barakat, analyst, Informa Telecoms and Media, says that Korek and Asiacell's "aggressive network expansion strategies" have helped them to win more customers over the past few months.

Security problems

The massive explosions that rocked Baghdad's Ministry of Justice building last month - said to have been one of the largest bombings since 2007 - were a grim reminder of the scale of the security problems facing the country. Rolling out a network in a country that has to contend with security threats on a daily bases is not easy, as Asiacell in particular has experienced with the operator's premises and cell towers being repeatedly targeted by bomb attacks. The operator has also been the most vocal critic of the jamming devices used by security forces to disrupt the use of improvised explosive devices.

Although security continues to be a concern, Motorola's country manager for Iraq, Hourani Motaz, says that compared to last year, jamming devices are not as much of a problem for the country's mobile operators, a point that Ericsson's head of North Middle East, Tarek Saadi, agrees with.

It was claimed that the authorities in Iraq failed to take the jamming devices into account when fines totaling US$20 million were dished out in May this year to Zain, Asiacell and Korek in relation to issues surrounding the quality of their networks. The operators questioned the way the fines had been calculated and communicated. A week after news of the fines had filtered through to the operators, Ali Al Dahwi, CEO of Zain Iraq - which received the largest fine of the three operators - told CommsMEA that the charges were evidence of the government's "strongly anti-investment" stance, and he cautioned foreign investors to be wary of entering the country "until somebody gets their act together".

While Ericsson's Saadi points to the licencing of three national operators and a mobile penetration rate of 66% as proof that the regulator in Iraq is "quite progressive compared to other under-developed countries around the world" others involved in the telecom sector in Iraq take a harder line.

The language used in Zain's last set of results was more restrained than the CEO's comments in Jordan. "The Iraqi mobile market continues to endure the absence of clear telecom regulations and an effective regulatory authority. Regulatory decisions are carried out by the Iraqi government and tend to be driven by politics," Al Dahwi says.

Iraq's telecoms regulator, known as the CMC (Communications and Media Commission), was without a director for most of the months since April 2008, when the previous head, Dr Siyamend Othman, completed his term in office. The CEO of regional operator Kalimat, Wilson Varghese, says although the Ministry of Communications is getting stronger, it is the regulator that should be given more powers. He says that the government-owned and operated Iraq Telecommunications and Post Company (ITPC), with its own CDMA network and fixed line is a competitor, but "they are the ones telling us what to do, so that is a conflict of interest".

"We have been raising our voices against this and telling the head of the regulator this will not work because ITPC cannot be telling us what to do," Varghese adds.

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