Opportunities and challenges for mobile players in Iraq and Libya

A number of telecoms news services this week picked up a story from Waleed Ibrahim of Reuters, who writes that Iraq's Finance Minister Bayan Jabor has announced the approval of two new mobile phone licenses for auction soon, one of them for a 3G network.

So, which telecoms groups might fancy setting up shop in what is the world's sixth most unstable country according to the 2009 Failed States Index produced by Foreign Policy magazine and the Fund for Peace?

A Cellular News piece, reporting the same item, states that Etisalat and Turkcell would be interested in bidding for a mobile license in the country. The Turkish cellco certainly seems to have a taste for adventure, having established an operation in Belarus, a country which under the leadership of President Alexander Lukashenko has been barred since 1997 from membership of the Council of Europe for election irregularities, and which has also attracted criticism for its record on human rights and freedom of the media.

Turkcell, then, is not shy of a challenging environment, something which is also evidenced by the operator's thwarted attempt to enter the Iranian market in 2004-2005. Earlier this month, DevelopingTelecomsWatch visited the issue of whether involvement in the Iranian market - and in the Syrian market - could derail South African telco MTN's mooted merger with giant Indian cellco Bharti Airtel. This is because banks involved in the transaction might fall foul of restrictions on dealing with these two countries which are set by the U.S. Treasury's Office of Foreign Assets Control (OFAC).

One country which might have proved problematic in these terms until quite recently is Libya. Now, however, relations between the USA and the North African country have improved to the point where such concerns should not be an obstacle to companies seeking to invest in Libya - and it seems Turkcell are keen to take advantage of this improved investment climate. According to a recent TelecomPaper story, the operator plans to bid for a licence to provide fixed and mobile phone services in Libya, announcing that the country's stable economy and per-capita income indicates the domestic telecoms market has high growth potential.

In February, the Global Mobile Daily service from Informa Telecoms & Media reported on the availability of this new licence, noting that the General Telecommunication Authority (GTA) of Libya had launched an international tender for a mobile and fixed-line concession in the country. As this report indicated, the Libyan telcoms market is currently monopolised by state-owned incumbent fixed-line operator General Posts and Telecommunications Company (GPTC), which owns 100% of mobile operators Libyana and Al-Madar. According to the GMD report, the GTA hopes the entrance of a new player will stimulate the country's telecoms market. That said, the status quo does not seem to have discouraged Libyans from embracing mobile technology and it should be stressed that the country is not under-penetrated. According to the World Cellular Information Service, Libya's mobile penetration rate is currently a hefty 141.58%. I am therefore a little uncertain what Turkcell might mean when it refers to the country's high growth potential. Perhaps the relatively low take-up of 3G services to date offers a nice opportunity. Or perhaps Turkcell is most excited about the chance to challenge the incumbent telco in the fixed-line voice and broadband space.

The Iraqi mobile market would appear to offer a lot more room for growth for Turkcell and any other companies keen to pick up one of the two new licences. Mobile penetration there stands at 67.47% according to WCIS.

However, aside from the general instability of the country mentioned at the top of this article, Iraq offers a challenging environment for mobile operators in some other ways. The imposition of fines by the authorities, for example, seems to happen on a fairly regular basis. Global Mobile Daily reported on 28th May that all three of the country's mobile operators had been fined for poor service, with Zain Iraq, facing the heftiest fine (USD 18.6 million) and Asiacell and Korek Telecom each being fined a little more than USD 1 million. The report notes that this is not the first such penalty for Zain, which had previously been fined USD 9 million.

This, however, does not appear to have prompted Zain to consider withdrawing from Iraq. A Reuters article last month quotes the group's CEO Saad al Barrak as saying the company will continue to operate in Iraq: "It's not a crisis at all. It's normal... to get some penalties here and there," Barrak said. According to Zain, the poor quality of service which caused the imposition of the fine is due to jamming by U.S. forces trying to prevent insurgents from setting off bombs.

Asked by Reuters whether Zain planned to halt its operations in Iraq in response to the fine, Barrak replied: "never."

This is not to suggest, however, that we can expect Zain Iraq's management to accept Government criticism and intervention in meek silence. A week before his group CEO's comments, Ali al-Dahwi, who heads up the operation in Iraq, used strong language to protest how his company is treated by the Iraqi authorities. "We kept our mouths shut for a long, long time from speaking the truth because this has something to do with the safety of the Iraqi people. One hundred percent we are sure (it is) interference and jamming," he told Reuters.

Dahwi said Zain Iraq tried to talk to the Government to explain why the service was suffering but met "deaf ears." He claims that the decision to impose the fine was based on "hearsay," rather than scientific proof. "The more we played Mr. Nice Guy, the more we were abused," he said. "It seems to me there are many members of this government who talk the talk about encouraging investment but when it comes to walking the walk, the only thing they care about is their political position, not Iraq, how to get reelected."

Iraq, then, is a market not without challenges for those courageous enough to invest there. I will be interested to see if Turkcell, a company I've followed closely for some time, will indeed make this move - and make the move into Libya, where it's less obvious to me that there is good room for growth.

Opportunities and challenges for mobile players in Iraq and Libya