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Love me Tender – bidding for Iraqi cellular

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Iraq is up for sale, but not everyone is entitled to bid. A study by the George Soros-backed Open Society Initiative sheds some light on the current auction for Iraq's cellular telephony infrastructure, a market that it is estimated to be worth $6 billion by 2008. And it concludes that the bidding process - subject to several amendments already - has been geared to exclude local talent.

It's not, as first suspected, a no-bid stitch up. But Iraq Revenue Watch has noted that restrictions prevent nationalized telecoms companies from bidding, which excludes some of the largest European and Asian carriers, and more pertinently, local Arab carriers including the company which has already activated a network in Iraq. And there's no requirement that bidders employ local talent.

(This conflicts with the Q&A helpfully provided by the Coalition Provisional Authority (CPA) to the press which states "There is no restriction on who can apply". The new strings were attached after the initial bidding round closed, on August 8.)

The Coalition Provisional Authority's stipulation that no carrier in which more than a 10 per cent stake is owned by a national government rules out Bahrain's Batelco, the Emirates' Etisalat and Kuwaiti MTC-Vodafone, as well as Orange (now owned by France Telecom) and Deutsche Telecom-owned T-Mobile, amongst others.

Showing admirable entrepreneurial zeal, Batelco activated a stealth GSM network in June, but was asked to stop after two days.

The bidding also requires that carriers demonstrate five successful implementations. Rather harshly, Iraq Revenue Watch views this as a strike against national carriers. But this cuts both ways, and equally, it can be said to penalize inexperienced cellular networks such as MCI, which had no experience of building a mobile network when given the job of implementing the emergency network for occupation forces in a no-bid award back in May.

More damagingly, says the report, the telecoms bidding process gives lie to the claim that Iraqi infrastructure will be left to the Iraqis. The state telecoms company ITPC is excluded from bidding, although we note that the Request for Proposals allows bidders to use the 350 towers that the ITPC erected.

And there's no requirement to employ local contractors - even though local knowledge could prevent the contractors from being shot. The reason for this is that such a stipulation would deter foreign investors. It's true that the bids for the networks are unusually short - two years a piece. But as perhaps the one place on earth with a wireless infrastructure more primitive than the United States, the huge potential of the Iraqi market is surely enough not to deter an investors, especially once they have a foot in the door.

And Batelco's success in starting a GSM network without the occupation even noticing shows the value of local knowledge.

"If US companies dominate in telecommunications services, this will lend credence to Iraqi cynicism regarding the economic motives for US intervention in Iraq."

The OSI report touches on the thorny question of air interface standards. The Middle East is a GSM stronghold, and a poorly-informed Senator Darrell Issa (CDMA, San Diego) was mistaken in asserting that US companies would lose out if the GSM standard was adopted. Nortel and Lucent, to name two, would beg to differ. However the CPA bid document requests that CDMA suppliers provide an alternative costing for a mixed CDMA/GSM network, and makes the same request of GSM suppliers.

Now why would it want to do that? If you're involved in the process, let us know - discretion is assured. ®

(Thanks JB, whose email could use a bit of reconstruction itself).

Related Links

Iraq's Reconstruction Contracts: Telecommunications [PDF, 43kb]
CPA - Mobile Licenses Competition

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