Three Iraqi Mobile Licences Awarded to MTC-Atheer, Asiacell and Korek

The previous Iraqi mobile licences expired in 2005 and gave operators only regional coverage; however, these were periodically renewed by Orascom's Iraqna, MTC-Atheer and Wataniya's Asiacell (see Iraq: 4 January 2007: MTC, Wataniya Get Iraqi Mobile Licence Extensions and 3 January 2007: Orascom Gets Licence Extension in Iraq). Currently, the three operators are able to compete on a national level. With only five participants for the auction, it was expected that at least two, or more likely three, of the major operators would win a licence. The award of a licence to Korek rather than Turkcell was also a surprise, given its financial backing and the expression of interest the operator recently showed (see Turkey: 8 August 2007: Turkcell Intends to Bid for Iraq and Kuwait Licences). The very short auction process raised a total of US$3.75 billion from the licences and will see small regional operator Korek play a significant role in Iraqi mobile services in the country.

Iraqna's exit was a surprise given that it was replaced by Korek, a significantly smaller operator than Turkcell—the only new international bidder. At the end of 2006, Iraqna had the second-highest market share of 33%, with MTC-Atheer on 36% and Asiacell with 31%. However, due to security issues, the operator suffered a significant drop from its peak of 40.5% at the end of 2005. These figures were relatively even due to the originally limited competition as a result of the separate coverage regions. The operator also posted a sharp fall in ARPU levels of 26.4% year-on-year (y/y) to US$15.3 and a 25.9% y/y drop in minutes of use (MoU) to 255 per month at the end of 2006; however, this was relative to other operators in the country. Whilst Iraqna had the advantage of commencing its network in the richer central part of Iraq, it also faced tremendous security issues, together with the loss of customers and some staff (see Iraq: 21 May 2007: Orascom's Iraqi Operations Losing Subscribers). The operator invested in deploying a network in the southern part of Iraq, and in 2005 and 2006 commenced deploying a service in the north.

Outlook and Implications

• Iraqna's Infrastructure: Iraqna faces the problem of deciding how to dispose of its Iraqi assets. The two likely options will be to make an immediate sale or lease it to an existing operator, such as Korek, which is less likely to have the financial backing of Atheer, backed by MTC, and Asiacell, whose parent company, Wataniya, was recently taken over by Qtel.
• Coverage Issues: The original licences allowed MTC Atheer to operate in southern Iraq; Iraqna, in central Iraq; and AsiaCell, in the north of the country. More recently, the operators have been able to compete nationally; however, they are all stronger in the locations where they initially deployed their networks. Now that all three operators will have national coverage, the existing positions of MTC-Atheer and Asiacell will enable them to take a significant proportion of the available market share compared with Korek.
• Central Iraq: Central Iraq has in the past been very lucrative for Iraqna and is also the richest part of the country. Korek should therefore focus on this region as it will have a better chance of taking market share. Its previous operations in Irbil are significantly smaller and it will have to step up operational performance to compete head-to-head with MTC-Atheer and Asiacell. Whilst Korek is smaller than the other eliminated bidder, Turkcell, it has the advantage of some recognition within the country, allowing its branding to play a significant role in attracting new customers.