The Iraqi government is fining two of the country’s mobile telecoms operators for breaching the conditions of their licences, while the country’s third operator has escaped any financial penalty.

The Finance Ministry in Baghdad says Kuwaiti telecoms giant Zain must pay $9m, while Asiacell, which is backed by Qatar’s Qtel, faces a $300,000 fine.

However, Korek Telecom, which is based in the Kurdish north of the country, has nothing to pay.
In November 2008, the Communications Ministry in Baghdad told MEED that a meeting of government ministers and regulators at the Communications & Media Commission had found all three of Iraq’s mobile phone operators guilty of breaching their licence conditions (MEED 28:11:08).

At the time the fines were first announced, Hayam al-Yasiri, an adviser at the Communications Ministry, said that Zain, Asiacell and Korek had all failed to provide the quality of service required in the terms of their licence agreements.

She added that Korek had also failed to build a nationwide network, which was a second breach of its licence.

Al-Yasiri also said the three operators had yet to pay for their mobile licences in full.

The ministry declined to explain why Korek has escaped a fine despite the two breaches of its licence. Korek did not respond to MEED’s calls.

Asiacell’s minority investor, Luxembourg-based bank MerchantBridge, confirms that the operator was fined in the first few weeks of 2008. “We got a very small fine based on the key performance indicators [in our licence],” says Basil al-Rahim, managing partner at MerchantBridge, which has a 19 per cent stake in Asiacell.

Qatari telecoms operator Qtel owns 30 per cent of Asiacell. A group of Kurdish businessmen led by Farooq Rasool, chairman of Asiacell, owns the controlling 51 per cent stake.

Zain says it will investigate the Iraqi government’s grounds for fining its Iraqi subsidiary before deciding whether or not to contest the decision.

“Zain will do its due diligence to see whether these fines are justified and will react in the interests of our stakeholders,” says a spokesman for the company.

The incumbent operators frequently encounter problems that are outside their control, according to the spokesman. “Sometimes we cannot get fuel supplies to our sites because the area is being blocked off by the government due to terrorist activities,” he says.

The Kuwaiti company is the largest mobile telecoms operator in Iraq, with 8.5 million mobile phone customers at the end of September 2008, compared with Asiacell’s 5.6 million.

Korek does not disclose either its customer numbers or its financial results.

Zain says conditions on the ground in the war-torn country are the main hurdle to providing a mobile service.

“The real issue is whether we provide a poor service,” says the Zain spokesman. “In Iraq, we have more security personnel than ordinary employees. We have problems with electricity and we have problems with sabotage. Can the operators be blamed for bad service if there is sabotage?”

Zain and Asiacell spent $1.25bn each acquiring their mobile phone licences in Iraq.

The Kuwaiti firm spent a further $1.2bn buying the customer base of IraQna, a mobile phone network owned by Egypt’s Orascom Telecom, which pulled out of the bidding for one of the three long-term mobile phone licences in August 2007.

Sirwan Barzani, chief executive officer of Korek Telecom, is the nephew of Massoud Barzani, the president of the Kurdistan Regional Government.

Key facts:

• Fine to be paid by Zain - $9m