Etisalat still upbeat on expansion into Iraq

Etisalat, the UAE's largest telecommunications operator, plans to expand into Iraq after making an offer to acquire one of its three mobile operators, Korek Telecom. Humam Amara, the chief executive of Korek, said negotiations between the two companies began last month but broke off after Korek rejected an offer from Etisalat to buy a majority stake. "The most recent communication we have had with Etisalat has not been too positive," said Mr Amara. "We were all surprised that they were making these announcements that they are close to closing a deal with us."

But Etisalat hinted last night that the deal may not have gone cold. A spokesman said there would probably be an announcement about the Iraq market by the end of next month. "Etisalat is still keen on the Iraqi market," said Ahmed bin Ali, the senior vice president of corporate communications for Etisalat. "With regards to Korek, the issue would be more clear by the end of April." Etisalat has been keen on entering Iraq since 2008, when it began its first round of talks with Korek, but poor economic conditions put those discussions on hold.

Senior Etisalat executives have also considered applying for a fourth mobile phone operator's licence in Iraq. Mohammed Omran, the chairman of Etisalat, said last month the company was looking at investing in Korek as part of its international expansion this year. Etisalat has about Dh9 billion (US$2.45bn) in cash to fund acquisitions this year and is considering six regional operators to invest in, Mr Omran said.

Mr Amara said three other operators had approached him about acquiring Korek but none was involved in formal discussions. He said Korek was valued at about $3bn. Korek became Iraq's third mobile company after buying a licence from the government in 2008 for $1.25bn. It has about 3 million subscribers and mainly operates in the Kurdistan region. Agility, a Kuwaiti logistics company, bought a 50 per cent stake in Korek for $500 million in 2007. It said last year it planned to divest its non-core assets.

Iraq is considered by industry watchers as the last major opportunity for telecoms operators to expand in the Middle East. The country has a mobile penetration of about 60 per cent, with subsidiaries of Zain and Qtel controlling most of the market. Most Iraqis rely on mobiles because much of the country's fixed-line infrastructure was destroyed in decades of war. If Etisalat were to buy Korek, the operator would probably provide its new subsidiary with enough capital to build a national wireless network to compete with Qtel and Zain, said Simon Simonian, a telecoms analyst with Shuaa Capital.