INVESTMENT OPPORTUNITIES IN IRAQI TELECOM INDUSTRY PUT AT $900 MILLION
The potential market opportunity for the telecom industry in Iraq is $900 million, Wall St. analysts estimated Fri. “Opportunities in Iraq for telecom firms are probably rosier than would be evident in a traditional risk assessment,” said Judy Smith, CEO of Atlantic-ACM Dataline Analysis, telecom consultancy firm. She said companies investigating in such opportunities should base their market entry decisions and risk analyses “on comparables as opposed to Iraq itself.”
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Iraq’s wireline deployment will require investment of $450-$675 million, considering that wireline voice switching equipment costs $50-$75 per line and other necessary gear including optical transport and access equipment is $100-$150 per line, a report by UBS Warburg said. It said an initial investment should target 3 million lines, and vendors such as Lucent, Tellabs and ADC Telecom were likely to be among the investors. Initial wireless network build-out in Iraq would cost $250 million and would be the quickest way to deploy a nationwide system, the report said. Smith said wireless companies would “devote keen interest” to Iraq as “it is moved from the blacklist to the ‘A’ list of global opportunities.” However, UBS Warburg said limited mobile communications service there should be established as “the country’s ability to deploy these types of systems has been hindered by U.N. sanctions.”
Under a yet-to-be-established regime, “the prospects [in Iraq] are considerably promising” and that “bodes well for telecom firms… seeking to plant their flags in Iraq,” Smith said. She said any company with the opportunity to build a new phone system for a “country with the resources to pay for services is likely to choose a new and efficient technology.” A Motorola spokesman said “we are always interested if opportunity arises” to expand the business. He said in Iraq it was “not so much about reconstruction, but construction of wireless networks. Clearly, there’s going to be a very short-term need for wireless” networks to aid reconstruction and humanitarian assistance. Meanwhile, Alcatel said last week it “confirmed [its] position in the Middle East” and Southeast Asia through extension of its contracts with Spacetel Yemen, one of the 2 mobile operators in Yemen, and CamGSM to expand the companies’ GSM 900 MHz mobile networks.
Land size is a “key metric” in determining the market opportunity for telecom equipment, “as any network build would initially be deployed across a particular geography rather than to serve a particular population,” the report said. It said the majority of investments would be focused on major cities and towns, although “long-haul communications through the desert will be needed to link up population centers.” Saudi Arabia, which completed its sixth 5-year Telecom Expansion Program (TEP-6) with value of $4 billion that was awarded to AT&T Network Systems in May 1994, is a “valid comparable” when determining the size of the Iraq market, the report said.
Deployment of the CDMA technology standard in Iraq, although politically attractive for U.S. companies, would be a “mistake from a functionality standpoint,” UBS Warburg said. It said Iraq already had a GSM system in place, and all surrounding markets except for Israel, which had one CDMA network (Pelephone) and 2 GSM systems (Cellcom Israel and Partner/Orange Communications), operated GSM networks. Global Mobile said 9 of the 10 largest wireless operators in the Middle East that collectively account for 86% of total subscribers in the region, were GSM networks. “Implementation of a CDMA-based system would severely limit the ability to roam into Iraq from the surrounding countries given the dominance of GSM technology in the region,” UBS Warburg said.
It’s “premature” to assume what standard will deployed initially in postwar Iraq, UBS Warburg said, but it expects any requests for proposal (RFP) to include bids from the major U.S. and European vendors such as Motorola, Lucent, Nortel, Ericsson and Nokia. It said a GSM system was deployed in Baghdad with equipment provided by a Chinese supplier, but said it was unclear whether that system ever was turned on. It said the only mobile communications network listed was in northern Iraq, a GSM 900 MHz system, operated by KurdTel in As Sulaymaniyah. It said it wasn’t able to identify the number of subscribers on this system, which it said was operated by autonomous Kurdish enclaves.
The CDMA Development Group (CDG) said there were 2.4 million CDMA subscribers in Europe, Middle East and Africa that included both cellular and limited mobility (WLL) users. It said excluding Israel’s Pelephone, which accounted for 70% of total EMEA CDMA subscribers, WLL existed in Egypt, Kuwait and Yemen. Global Mobile said there were 47 million wireless subscribers in the Middle East, with Turkey, Israel and Saudi Arabia accounting for 75-80% of the total.