Iraq Approves Auction of Two Mobile Licences

Finance Minister Bayan Jabor has announced that the cabinet has approved two new mobile phone licenses for auction soon, stating, "Now we are waiting to start the procedure (for tendering), which we expect to be soon," Reuters reports. The news comes almost two years after the Iraqi government previously issued new national mobile licences to two of the existing national operators and to the smaller regional operator Korek (see Iraq: 17 August 2007: Three Iraqi Mobile Licences Awarded to MTC-Atheer, Asiacell and Korek). These operators are aiming to provide nationwide service in the country; however, due to the tough operating conditions, have suffered some setbacks. Currently Zain is the only operator with full mobile coverage in the country while Asiacell (now part owned by Qtel) has almost national coverage. Korek is still in the process of partnering with another operator to help it deploy a full national network. Korek Telecom, has announced it is focusing on aggressively expanding coverage nationally, according to the Middle East North Africa Financial Network. In May this year, Korek announced plans to investment a total of US$100 million for the second phase of its mobile network expansion (see Iraq: 13 May 2009: Korek Telecom Seeks Mobile Network Expansion in Iraq). The charted plans aim to increase the subscriber base to a total of 4 million with US$300 million over the next few years, to increase network capacity by more than 2 million subscribers, and to provide nationwide coverage.

Currently, Zain is the largest operator in Iraq; the acquisition of Iraqna's infrastructure in 2007 has increased Zain's national market share to 70%. The remaining market share of 30% is allocated to Asiacell. Although the third operator, Korek has a licence, it is does not yet have the infrastructure in place to deploy national services and only operates in a small northern Kurdish region. Mobile penetration at the end of 2008 was approximately 45% which is considered very low compared to other Middle Eastern nations—such as the United Arab Emirates, Kuwait, Qatar, and Israel—all of which have exceeded mobile penetration levels of 100%. Asiacell already has acquired five million subscribers although its competitor Zain has 7.7 million. Iraqi mobile penetration has rapidly increased between 2004 and 2007 from almost nothing a few years earlier, due to the fact that the fixed-line network was hit by sanctions after Iraq's invasion of Kuwait in 1990 and barely survived the bombing during the 2003 war. Additionally there are three fixed-wireless operators, Itisaluna, Omnea, and Kalimat who are in the process of providing national services primarily for broadband; however, users are still able to make limited mobility calls internationally for a significantly lower price. These fixed-wireless operators are only capable of offering lower international calls due to their control over the international gateway, not offered to the mobile operators.

Unfortunately service quality levels have not been very high and have been fined by the government. Earlier this year, Zain was fined US$18.6 million for poor mobile services and also fined Korek and Asiacell, a little over US$1 million each for failing to meet minimum standards of services.

Outlook and Implications

Iraq’s mobile penetration has increased rapidly since the award of the new mobile licences in 2007 and is currently in the region of around 50—60%. Two new mobile licences will make Iraq one of the most competitive countries in the region. As yet there is no information on how the licence will be offered, or whether existing operators are able to bid for the 3G licence available.

The news of new operators in the country will come as a huge blow to all three players as all have invested considerable sums to enter the market in 2007. In 2007, each operator paid US$1.25 billion for the licence and Zain paid an additional US$1.2 billion to acquire Iraqna’s mobile infrastructure. Zain has also announced at the Iraq Telecoms conference in London 2008 that its total investment would come close to US$5 billion in the country within the next few years. Asiacell also confirmed a further US$1-billion investment for its mobile operations. The mobile operators already have to pay the government between 22—28% of revenues as part of the licence offering to the government, this is at least 10% more than the fixed-wireless operators’.