France Telecom buys Iraq’s Korek

19 December 2010

French operator will have issues to face, but is gaining three million new subscribers in an attractive market

France Telecom (FT) has managed to expand its foothold in the Middle East once again, just three months after it acquired a 40 per cent stake in Morocco’s Meditel.

The company is aiming to double its revenues and is seeking to do so in the traditional telco method – acquiring licences and operators. If the deal with Iraq’s Korek telecom is finalised without any difficulty, then it places FT in an envious position. Iraq’s mobile sector is an attractive, emerging market, with a penetration rate of under 80 per cent.

Both firms will benefit from the acquisition. Korek can now realise its expansion plans with the help of a global player. And it is a cheaper alternative for FT, saving it the hassle of bidding for the fourth licence and building the infrastructure and network from scratch. 

Iraq’s market will benefit from the arrival of a European player, which will inject more competition and encourage innovation in a region still heavily reliant on voice. The firm has established research and development labs in Amman and Cairo to create services and products specific to the Middle East market.

The process will not be easy for FT. Korek does not have a great track record in negotiating the sale of its shares. Etisalat accused the firm of demanding too much for too little when the Abu Dhabi operator entered talks for an acquisition more than two years ago. Even if the deal is finalised, FT will need to cope with the frequency jamming and security issues that have plagued the local operators in Iraq.

Yet it is a triumph for FT and it can now add another three million subscribers to its target of 300 million worldwide.

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