Iraq has scrapped its long-delayed cellular auction and instead decided to license the three national wireless carriers in June under an arrangement calling for revenue-sharing and an upfront cash payment of at least $250 million from each operator, according to Iraqi government and industry sources.
The decision removes a cloud of uncertainty over Iraqi national carriers, GSM wireless vendors and investors on
arguably the most successful reconstruction effort since the U.S.-led invasion to overthrow Saddam Hussein began in March 2003. Iraq, with effectively no cellular market under Saddam’s iron-fisted regime, now has nearly 10 million mobile-phone subscribers. In addition to the three national cellular carriers, there are two smaller cellphone operators in Iraq.
The Iraqi government action is not welcome news for U.S.-based Qualcomm Inc., the global CDMA leader, which has tried to make inroads in the GSM-dominated Middle East. However, Iraqi wireless local loop licenses will be based on CDMA technology.
Iraqi Prime Minister Nouri al-Maliki, reacting to complaints over licensing uncertainty from Orascom Telecom Iraq Corp., Asia Cell Telecommunications Co. Ltd. and Atheer Telecom Iraq Ltd., created a committee to address the matter. The panel, which included Iraqi ministers of communications, finance, technology and national security and Communications and Media Commission head Siyamend Zaid Othman, met with wireless executives three weeks ago. The outcome was an agreement in principle that the three national operators each would receive a 15-year license, with automatic renewals every five years thereafter. In exchange, Orascom, Asia Cell and Atheer agreed to make a cash payment of at least $250 million and share 18 percent of annual gross revenues with the Iraqi government. In addition, the ownership of the three national mobile-phone carriers must be significantly Iraqi. The three national cellular licenses are expected to be issued by June 30.
Orascom, Asia Cell and Atheer have been in limbo since late 2005 when their two-year regional/ national permits issued from the now-defunct Coalition Provisional Authority expired. After that, the Iraqi government extended licenses for six months and then every three months as the CMC pursued an auction of up to four national cellular carriers. The carriers have invested hundreds of millions of dollars in mobile-phone deployment, but have held back on contracts and expansion generally because of the questions in cellular licensing. A power struggle ensued between independent telecom-media regulator CMC and Iraqi’s Ministry of Communications, with the latter ultimately gaining the upper hand.
GSM infrastructure vendors serving the three national carriers include Motorola Inc., Alcatel-Lucent, Huawei and Nokia-Siemens. Motorola, Nokia Corp., Sony-Ericsson and others that supply GSM handsets to the carriers.
Asia Cell’s investors are Asia Cell Co., Wataniya Telecom and United Gulf Bank. Orascom is held by Orascom Telecom Holdings SAE (Egypt), Alaa El Khawaja and Allied SA Ltd. Investors in Atheer are MTC (Kuwait), Dijla Telecommunications Corp. and Kharafi National.
Press reports have speculated about the possible liquidation of Asia Cell in connection with a legal dispute over Wataniya’s stake in the company.
An Asia Cell official said the reports are inaccurate.
“Following the Iraqi government’s decision on Jan. 1 to renew the license for Asia Cell and its new partner Raywood Inc., Qtel /Wataniya no longer owns a license to operate in Iraq,” said Zino Faruq, marketing director of Asia Cell. “Asia Cell is currently exploring a number of options of evaluating the assets belonging to Qtel/Wataniya so they can either buy them from Wataniya or dispose of these assets. Wataniya would not be able to utilize this equipment since they have lost the license in Iraq and their operations elsewhere use different equipment vendors. One of the options available for Qtel/Wataniya is to remove their equipment out of Iraq.
