Etisalat in race for Iraqi licence

Etisalat is one of eight operators presenting a case to form a partnership with the Iraqi government for the country's fourth telecom licence.

Etisalat hopes to form a partnership with the Iraqi government and obtain a mobile phone licence.

Etisalat is one of eight telecommunications operators presenting a case to form a partnership with the Iraqi government for the country's fourth mobile phone licence. It is competing against some of the largest mobile phone companies in the world including MTN, Turkcell, Vodafone, Verizon and France Telecom, said Farooq Abdulqader Abdulrahman, the minister of communications for Iraq.

"We invited all these companies to show their interest and what their plan would be in Iraq," Mr Abdulrahman said on the sidelines of the Telecoms World Middle East conference in Dubai. Etisalat could find its way into Iraq through another strategy - acquisitions. Zain's Iraqi operations would be one of the crown jewels that the UAE operator would acquire if its US$10.5 billion (Dh38.56bn) bid for a 46 per cent stake in the Kuwaiti firm is approved.

Representatives from both Zain and Etisalat declined to comment on the negotiations. Operators would not buy the Iraqi licence at auction but would have to agree to conditions that include setting aside a minimum of 30 per cent of revenues for the government. "We want to finalise the process by the first quarter of next year," Mr Abdulrahman said. "We are not looking to sell the licences. We don't want to auction the licence. We want to enter a partnership with revenue sharing where they operate it and they invest a percentage on our behalf. It's a different model."

The Iraqi government had announced it would provide a fourth licence to the ministry but it has yet to be awarded by the country's telecommunications regulator, Mr Abdulrahman said. The ministry still would like to view presentations from another six operators before making a final decision on who will be awarded the licence, he added. The fourth licence will allow operators to build networks capable of third-generation connection speeds, a technology that is considerably faster than the current GSM offering available to Iraqi consumers, Mr Abdulrahman said.

Iraq is one of the few countries in the Middle East that offers operators an opportunity for major growth and high monthly revenue. There are currently three operators in the country: Zain, the market leader with about 12 million subscribers; Asiacell, which is partly owned by Qatar Telecom, with 6 million customers; and Korek Telecom, an operator based in northern Iraq, with 2.5 million users. Mr Abdulrahman said Iraq had a mobile penetration rate of about 60 per cent but that could be as high as 90 per cent by the end of next year if Korek Telecom expanded across the whole country.

Etisalat has attempted to enter the Iraqi market for more than two years. It has entered negotiations with Korek Telecom several times but has failed to reach a deal. Mr Abdulrahman said the ministry would not stand in Etisalat's way if the operator were to purchase Zain's Iraqi business. "At the end of the day, it's about the quality of the service," Mr Abdulrahman said. "We're not concerned about who is taken over as long as the service is good."

If successful, Etisalat would have to invest in upgrading its networks to offset the impact of military jamming equipment. Iraqi operators have complained several times to the government that electronic blockers intended to prevent terrorist attacks can also affect the general public's use of mobile services, harming revenues. Emad Makiya, the chief executive of Zain Iraq, said up to 30 per cent of calls were blocked by the armed forces' equipment, which the Iraqi military inherited from the US.

However, Mr Abdulrahman played down the problem. "Jamming is only issue and maybe two years ago, it was more [significant]", he said. "But now, when all the military forces left, there's no [jamming] equipment in the streets. So there's no problem, it's more of an investment issue."