Orascom Telecom has won one of three licences to provide mobile telephone services to Iraq Orascom Telecom Holding may have made its best deal yet. Together with other Iraqi and Arab investors the consortium has won the licence to roll out mobile telephone services in the central region of Iraq, including Baghdad and the governorates of Diyala and Anbar, home to 39 per cent of Iraq's 26 million inhabitants. "We are hoping for one million subscribers in the first two years," Naguib Sawiris, OT chairman was quoted as saying. Orascom Telecom Iraq Corp (OTI), which will own and operate the licence, is majority owned and controlled by Orascom Telecom. OT is the largest operator of GSM networks in the Middle East and Africa, active in Egypt, Tunisia, Algeria, Pakistan, Chad, Congo, the Democratic Republic of Congo (formerly Zaire), Zimbabwe and Cote d' Ivoire OT is the first Egyptian company to be awarded a slice of the Iraq reconstruction cake. Significantly, though, the two other licences on offer were also won by Arab companies. The US-led coalition invited tenders for a commercial mobile network in July and more than 100 bids were submitted. The consortia led by the Mobile Telecommunications Company of Kuwait won the licence to provide GSM service to the Southern region of Iraq. The Northern region will be served by another consortium that includes Kuwaiti Wataniya Telecom. "When Arab companies win the all three Iraqi licences the decision is definitely politically driven. American and European companies have grabbed most of the reconstruction pie. It was time to give the Arabs a piece of the cake," said Joseph Iskandar, an investment analyst with Cairo-based Prime Securities. That the GSM rather than CDMA system was chosen effectively excluded American companies. The issue of which standard would be used had become controversial: selecting the CDMA system would have virtually guaranteed the success of US bids while at the same time isolating Iraq from its neighbours, all of which use GSM, as do 70 per cent of the world's mobile subscribers. Mixing the systems would have isolated the three regions from one another. According to the terms of the deal the companies are expected to make services available within two months, though how they will do this in light of the security situation in Iraq remains to be seen. The successful bidders will be charged no fees for the licences though they are required to provide cheap service. "The maximum cost per minute will not exceed 10 cents," according to Iraqi Minister of Telecommunications Haider Al-Abadi. OT's investment over the two years for which the licence will run is expected to be in the range of $100 million. The licences were limited to two years so as not "to tie the hands of the future government", according to a Coalition Provisional Authority spokesman. The announcement of the successful bids, scheduled for last month, was delayed till Monday. Analysts were optimistic that the deal would impact positively on the company's financial results. "The fact that OT will not pay a licence fee and that its suppliers will be financing the deal will not burden the company's cash flow," says Prime's Iskandar. "It will not pay a licence fee now and it will just receive cash from subscribers and thus will not add to its short term debt problems." OT, one of the most actively traded shares on the Egyptian stock market and one of only eight Egyptian companies trading Global Depository Receipts on London Stock Exchange, reported a more than eight-fold increase in net profits for the first half of 2003 as it sold off loss making concerns and restructured its balance sheet to reduce debt. OT shares reacted buoyantly to the news of the deal, closing at LE60.19 on Tuesday, up from LE55 on Sunday. During the day some brokers had even placed orders at LE70. Spurred by the news Egyptian big caps were pushed to their highest close in more than three years. The Benchmark Hermes index hit 10,647, its highest since May 2000. Indeed, market transactions across the board appeared to be spurred on by a new found optimism, with turnover doubling to LE180 million. "But shares in OT have been on the rise since the company announced that it was bidding for one of the Iraqi licences two months ago," said Iskandar. Nor was he surprised by the success of the bid. OT met all the criteria put by the CPA, he pointed out, foremost among which was having extensive experience in the region. Reported by Niveen Wahish and Sherine Abdel-Razek
