WASHINGTON-Iraq’s telecom regulatory chief vowed not to cave to pressure to extend license terms of the country’s three national wireless operators, an escalating controversy overshadowed last week by a deadly ambush of a three-car convoy with technicians, body guards and drivers employed by Iraqi cellular company Iraqna. Two Kenyan engineers employed by Iraqna were kidnapped and 10 others killed in the incident, according to foreign press reports.
At least one wireless carrier argues that license terms should be extended until security improves in the war-battered country.
Siyamend Othman, head of the Iraqi National Communications and Media Commission, said commercial self interest-not security-is driving the push to lengthen mobile-phone license terms in Iraq.
“The incumbents are making a mountain out of a molehill when they talk about security,” said Othman. “It is in their interest to say so, because they do not want others to come. That’s why they’ve been going around saying, `security, security’ etcetera. Ask any of these mobile operators, `Have you not recouped all your investments and made huge profits in just under two years?’ Now this is phenomenal. I don’t think this has happened elsewhere.”
Othman, who recently met with U.S. government and industry officials, was reacting to comments by Naguib Sawiris, chief executive officer of Iraqna’s Egyptian parent company, Orascom Telecom Holding S.A.E., in a Jan. 12 Financial Times article.
Sawiris was quoted as saying, “Security is never going to be restored in six months.” Sawiris, according to the story, said mobile-phone licenses should be extended three to five years. Othman called the news report a “planted article.”
The six months referenced by Sawiris is the license extension granted by the NCMC to Iraqna, AsisaCell and MTC Atheer in late December, not long after historic parliamentary elections were held. The three GSM operators have signed up between 4 million to 4.5 million subscribers to date. Industry subscriber counts are more conservative.
The NCMC plans to auction off two to four national GSM licenses in late June. Next month, national wireless local loop licenses are expected to be awarded by NCMC.
Motorola Inc., which supplies equipment to Iraqna and MTC Atheer, is closely monitoring the dispute over Iraqi mobile-phone license terms.
“The mobile telephone has specificity different from electric infrastructure and oil pipelines. And that is everybody needs a mobile telephone-including terrorists,” said Othman. “It has happened that terrorists in Iraq have threatened mobile-phone operators for not extending the network to their area, whereas with other industries they go and blow them up, as in the case of electricity and oil pipelines.”
While agreeing security remains a big problem in Iraq, Othman said the situation does not justify further extension of cellular license terms.
“The current incumbents are making a story of the security in order to discourage others, so they have the market for themselves,” said Othman. “We know, because we have seen their accounts, that they have made very handsome profits in just two years. Now, this is very rare. We have told them if it is such a bad situation in which you are working, leave.” Othman said the three cellular operators paid very little to acquire Iraqi mobile-phone licenses.
Iraqna and the other two Iraqi carriers could not be reached for comment, but Sawiris indicated in a press release last week that Iraqna has visions of doing business in Iraq well into the future.
“Although Iraqna was guaranteed only a six-month extension, Orascom Telecom intends to pursue its aggressive growth strategy of being the leader in the market, and looks forward to participating in the long-term license issuance process,” said Sawiris. “We believe Iraq harbors large potential for growth and remains a very attractive market for Orascom Telecom.”
Orascom said Iraqna revenues jumped to $249 million during the first nine months of 2005, with an earnings before interest, taxes, depreciation and amortization margin of 66.3 percent. Iraqna counted more than 1.5 million subscribers as of October, according to Orascom.
