Mixed fortunes for Iraqi telecoms

Despite a flurry of positive news, Iraq's telecoms sector faces some endemic problems that need urgent attention.

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Mixed fortunes for Iraqi telecoms Iraq's telcos and regulator must do more to improve services.
By  Roger Field Published  April 8, 2011

Iraq’s telecoms sector has rarely been out of the news over the past month, and the developments have been largely positive, with some major network investments announced.

First, France Telecom and Agility announced a plan to acquire a 44% stake in Korek Telecom, Iraq’s third operator, for a combined sum of about $295 million, plus about $285 million in loans.

Later in March, Zain Iraq said that it had expanded its mobile network to cover Kurdistan, a region where its rival operators Asiacell and Korek already operate. The telco said it intends to invest $100 million in Kurdistan in the next five months.

Just a couple of weeks earlier, Zain Iraq gained a $400 million, seven year loan from the IFC, a member of the World Bank Group, to support the expansion of its services in the country.

Iraq’s telecoms sector was given further room for optimism with reports that the government was planning to auction a $2 billion fourth mobile licence by the end of the year, according to a report from Reuters.

Mohammed Allawi, Iraq’s communications minister, added that the ministry was planning to invest $500 million in telecoms infrastructure this year, a sum that includes 37% of last year’s budget, which had not been spent.

But beneath the veneer of upbeat developments, some familiar problems also appeared. The most serious was news that Zain Iraq had breached Iraq’s telecoms rules by allegedly distributing 5 million Sim cards without regulatory approval.

Perhaps more worrying than the charge leveled against Zain Iraq was the reaction of Iraq’s telecoms regulator, the CMC, which ordered all of the country’s operators to stop interconnection with the unlicenced lines, as well as threatening Zain Iraq with a $262 million fine.

In many ways, the CMC’s decision to order Iraq’s telcos to stop interconnecting with the disputed Sims is typical of the actions of the country’s overall telecoms sector, which often forgets to put the customer first.

Indeed, the action has the potential to leave some 5 million mobile users without a proper mobile service, and all over a matter that they probably have little or no awareness of.

Given that Zain Iraq said that it was preparing to challenge the ruling and the $262 million fine, it might have been wise for the regulator to at least allow the disputed Sims – and their owners – a stay of execution. Such a large fine is also questionable, as it would only serve to detract from investment in the market.

But this is not the first time a large fine has been handed to an Iraqi operator. In 2009, Iraq’s ministry of communications handed fines worth a total of $20 million to Iraq’s three operators, Zain, Asiacell and Korek for “bad service” – an accusation that the telcos attributed to jamming devices used by the military to block mobile phone signals used to detonate road side bombs.

While all of Iraq’s operators should play to the rules of the country, the issue of the disputed Sims should not become a major distraction in a market with so many other problems, from an absence of post-paid billing to poor coverage, a lack of infrastructure sharing or even roaming agreements between the main telcos.

Indeed, the lack of collaboration between the operators in terms of infrastructure sharing and roaming means that users who need to travel around the country are frequently forced to use more than one Sim card to get “full” nationwide coverage.

Among Iraq’s many other problems is the dire need for the government to update regulations surrounding the ownership of fibre optic cable in the ground.

According to Omar Barzanji, CEO of Technology Partners, a telecoms systems integrator, the current law means that any fibre that is deployed in the ground automatically belongs to the government. The situation means that private companies are deterred from investing in fibre.

Barzanji says that operators who deploy fibre should be able to own it and also own the interconnection points at the exchanges. “The best approach would be to privatise it fully and allow professional international operators manage it,” he says. “Currently ITPC has given flawed revenue sharing agreements to small inexperienced local companies that lack financing and core competences.”

He adds that the telecom law ratification in Iraq should be treated with “utmost urgency” in order to attract international and competent data operators. “The current state owned mentality must change, ITPC has to let go its rains and allow broadband progress come to Iraq.”

However the issues of the allegedly unlicenced Sim cards and ownership of infrastructure pan out, Iraq’s operators, regulator and Ministry of Communications need to consider ways of placing telecom users at the heart of their strategy to bring quality telecoms services to Iraq. Bickering and infighting will only hinder this process.

2804 days ago
A. Ramahi

The current communcation services is below desired standards and need full attention from all operators.

CMC has been established in order that all licenses are observed, however, even all operators are in fault in majority of license terms but still they are allowed to operate and continue moving.

If CMC had enough power in reality and not just paper then we would see license fees and terms enforced and we see much better services in short time.
The $262 Million Penalty is nothing compared to the billions Zain obtained in Iraq. The 5 Million sims sold have a street value over $100 Million without counting other related revenue.

The only way for Iraq telecom to improve is to have a strong CMC with power to shut down violaters in GSM, CDMA, Satellite, Radio and other.

Best of fortune to Iraqi People.

2804 days ago
Mohammed Serieh Edited by ITP.net

Dear Roger, It’s true that the regulator ordered operators to disconnect unlicensed ranges, but it’s inaccurate to assume that all these ranges are active customers. The ranges are 5M numbers, but these are just the ranges and the active customers on them is around 600K only. It’s important to communicate the right messages to the public for otherwise wrong assumptions will be made. Mohammed

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