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Iraq launches sale of mobile phone licences

Iraq set a starting price of $300 million for the 15-year mobile licenses which five consortia are bidding for at an auction in the Jordanian capital, officials said.

The fixed-line network was hit by sanctions after Iraq’s invasion of Kuwait in 1990 and by bombing during the 2003 US-led invasion.

Iraqi mobile use rose to 8 million out of a population of 26 million at the end of 2006, from virtually nothing three years earlier, according to officials.

“The price will start from a certain level which is $300 million plus 18 percent revenue sharing,” Communications Minister Mohammed Allawi told Reuters ahead of the auction in a hotel in Amman. The auction is being attended by senior ministers and parliamentarians.

The 15-year licences replace three short-term contracts awarded soon after the US-led invasion in 2003.

The bidders include current operators Cairo-based Orascom Telecom Holdings, Kuwait’s Mobile Telecommunications Co, and AsiaCell, said Siyamend Othman, head of the National Communications and Media Commission.

Leading Turkish mobile phone operator Turkcell and Korek Telecom will also bid, Othman told Reuters.

U.K. consultants Price Waterhouse Cooper are overseeing the auction under a tendering process that took a year and a half and left five mainly Middle Eastern bidders in the running out of 11 firms originally shortlisted.

Depending on the offers, the bids will rise $50 million at each round with the minimum 18 percent revenue sharing set in the auction possibly rising, Allawi said. Revenue sharing is currently 13 percent.

Allawi said the winning bidders would be announced on Aug 20 in a two-day process.

Iraq was not considering more licenses beyond the existing three, he added.

“At the end of the day we want three companies...The winners could be newcomers or the same old ones or a combination of both,” Allawi added.

More revenues

Officials said the auction, which has been delayed due to Iraq’s security problems, is a drive to get more revenues and improve services in a market that is viewed as underpenetrated.

They also said the major multi-million dollar auction system in a major government deal was to counter widespread criticism of lack of accountability that has plagued Iraqi administrations since the US led invasion.

”The auction is held in total transprency,” said Finance Minister Bayan Jabor, among the team of government ministers, and the state audit chief witnessing the auction.

Jabor told Reuters the winning firms will have to offer 45 percent of their equity to the Iraqi public within a period of four years specified in the contract as part of a drive by the authorities to widen public ownership in lucrative investments.

In addition to at least 18 percent of revenues going to government coffers, the finance ministry will levy 15 percent tax on the profits of the mobile companies, he added.

There is widespread belief that the original licenses were offered too cheaply to existing operators.

“The services they are providing the people is very low and this license is for 15 years and they have to build up their infrastructure to a high level to give good service,” Allawi said.