IRAQ. A major milestone toward the reconstruction of Iraq's infrastructure was reached yesterday when the Iraqi government sold three cellular phone licenses - estimated to be worth just US$5 million in 2003 - for US$3.75 billion.
The three winning bids were from Mobile Telecommunications of Kuwait; Asiacell, which is part of Kuwait's Wataniya Telecom; and Iraq-based Korek Telecom. They won the rights to provide mobile service in a country that continues to rely heavily on wireless phones after war and sanctions disrupted land-line service.
The three firms, which already run networks in the war-torn country, made the highest bids in two days of auctions that ended yesterday in Amman, Jordan, according to the Finance Ministry.
The new 15-year licences handed out yesterday replace three short-term contracts awarded soon after the American-led invasion. The firms will share 18% of their revenues with the Iraqi government and pay a 15% tax on profits, the Finance Ministry said.
In a surprise, Egypt's Orascom Telecom, the first company to provide full mobile phone service in Baghdad after the 2003 invasion, dropped out of the race after bidding reached US$1.25 billion, a Finance Ministry spokesman said.
The company operated here through its subsidiary, Iraqna, and claimed to have about 3 million subscribers or more than a third of Iraq's lucrative mobile phone market. The company invested almost US$300 million in Iraq since it first won the rights to operate here in 2003, according to Iraq's National Communications and Media Commission, Iraq's regulatory body.
Iraqna CEO Allan Richardson could not be reached for comment.
The mobile phone industry in Iraq is one of the few sectors of the war-ravaged economy still posting positive revenues in the wake of political instability and badly damaged infrastructure. An ICT industry held in Sharjah, UAE, earlier this year showed the full scale of the Iraqi government's ambition to modernise voice and data services throughout all the provinces.
Iraq's fixed-line network was hit by sanctions after Iraq's invasion of Kuwait in 1990 and by bombing during the US-led invasion in 2003. Government officials estimate that less than 4% of Iraqis have land lines while mobile use rose to 8 million at the end of 2006.
This is the first time that Iraq has held an auction to award mobile licences. In 2003, the Ministry of Communications issued licenses for Iraqna to operate in central Iraq, as well as for MTC-Atheer in southern Iraq and AsiaCell in the north of the country. Iraqi officials say they used the auction, organised by the National Communications and Media Commission, as part of a drive to increase revenues and improve services in the country where large areas are still not being serviced at all.
The auction system was designed to fight 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. 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.