WASHINGTON-A consortium with investors from Iraq, the United States, South Korea and the United Kingdom applied last week to construct U.S.-engineered CDMA technology mobile-phone networks in Iraq, according to sources, despite indications the U.S.-led Coalition Provisional Authority and new telecom ministry may be leaning toward European-based GSM because the technology is prevalent in the region and would facilitate roaming in the Middle East.
The CDMA consortia is led by Liberty Mobile reportedly under the direction of Irish businessman Declan Ganley, who has investments in several mobile-phone systems in Europe.
The deadline for submitting bids for the three regional mobile-phone licenses in north, central and southern Iraq was last Thursday. The CPA said it expects to award licenses early next month.
Ever since the close of the bidding conference in Amman, Jordan, last month, which prompted the CPA to relax government ownership restrictions (now 10 percent) and reduce the performance bond payment to $30 million, sources said prospective applicants have been engaged in frenzied negotiations to form alliances.
The CPA had not issued a list of bidders as of Friday afternoon. Regional licenses can be converted into national authorizations if chosen mobile-phone firms meet requirements of the CPA and the new telecom ministry. Both organizations are receiving technical assistance from the Federal Communications Commission, Commerce Department, State Department and the U.S. Agency for International Development.
Liberty Mobile is expected to get stiff-if not overwhelming-competition from GSM wireless applicants in the hunt for Iraqi cellular licenses.
Bahrain Telecommunications Co., which last month launched GSM mobile-phone service in Iraq only to be shut down by the CPA, and Turkcell, the top GSM mobile-phone operator in Turkey, said they are in different consortia that filed applications to construct mobile-phone systems in Iraq.
Among the other entities expected to be in the competitive mix for Iraqi wireless licenses are Orascom, the largest GSM network operator in the Middle East, Africa and Indian sub-continent; Investcom, said to be headed by the Lebanese Meykapi Group that has wireless interests in Africa; Kuwait’s MTC Vodafone, which operates a private GSM system in southern Iraq; and Q-Tel, the primary Qatar telecom service provider.
Although Vodafone has a marketing relationship in Kuwait’s MTC Vodafone, Vodafone Group plc did not join any partnership to vie on Iraqi mobile-phone licenses, sources said. A spokeswoman for MCI WorldCom Inc. said she did not know whether the embattled long-distance carrier applied for Iraqi mobile-phone licenses. Earlier this year, MCI received a $16 million contract from the Pentagon to supply mobile-phone service to military, government and Red Cross personnel in Baghdad. But the Bush administration recently proposed barring MCI from receiving new government contracts because of fraudulent accounting practices.
Unraveling ownership percentages, management structure, vendor agreements, coverage proposals, financial qualifications and other details of bidders’ proposals could be difficult, depending on how much information CPA decides to release.
Licenses are valid for two years, a business risk that combined with security, health and economic problems-not to mention political instability-makes the great rush for wireless licenses somewhat of a gamble.
On the other hand, the opportunity is there-especially for investors that have witnessed wireless growth level off in many industrialized nations. With a population of 23 million and an already poor infrastructure (mobile-phone service wasn’t even available to Iraqi citizens under ousted President Saddam Hussein) that was further damaged by U.S. bombing, Iraq offers business prospects for those not faint of heart.
“In many cases, we cannot do it alone. There is too much risk,” said Rashid Al-Snan, regional operations manager for Batelco. The Bahrain firm is 20-percent owned by the U.K.’s Cable & Wireless.
Al-Snan said Batelco’s consortium has backing from Iraqi, Arab and Singapore investors. He said Batelco was approached by Investcom, but decided against joining the venture.
Al-Snan said security is a bigger worry than the two-year license term.
“I do not seriously think the Iraqi government is going to pull you out if you are serving 2 million customers. No one is going to tell you to stop,” said Al-Snan.
Security is a different story, he said.
“In our brief visit to Iraq we saw how bad security is,” Al-Snan added.
