Two companies in the running for minority stake in the Iraq telecoms operator
Iraqi-based operator Korek Telecom is in discussions with two companies for a minority stake in the firm, with a decision likely to be made during the first week of December. France Telecom’s Orange is in the running with an offer of $1.6bn. Korek declined to name the second bidder.
“A partnership will benefit us and help us reach our targets and our potential. We are offering a 35-49 per cent minority stake with shared management,” says Humam Amara, Korek’s chief executive officer.
The operator was approached three months ago after negotiations with the UAE’s Etisalat ended earlier this year. Korek was keen to maintain a majority stake in the firm with control over its Kurdish operations when negotiating with Etisalat. The negotiations lasted more than two years, but ended when Etisalat decided to acquire Kuwait’s Zain for $12bn earlier in 2010.
“Korek cannot afford to make such a demand, they will lose out if they do not agree to the offer,” says a senior Iraqi ministry source.
The company is the smallest of the three national mobile operators in Iraq, with about three million subscribers. Asiacell, which is majority owned by Qatar Telecom, has eight million subscribers and Zain Iraq has 12 million subscribers.
Korek’s intended expansion and growth has been slow in comparison. It has invested $900m in its infrastructure and network expansion. The operator recently signed a deal with Nokia Siemens Networks to build 300 new sites. Korek launched its commercial services in Baghdad earlier this month.
If the Korek deal goes ahead, then France Telecom will withdraw its bid for Iraq’s fourth mobile licence. The company is keen to expand its presence in the region. It plans to double revenue in its emerging markets by 2015 mainly through acquisitions. It recently acquired a 40 per cent stake in Morocco’s Meditel for $856m. It has also placed a bid for Syria’s third mobile licence, due to be auctioned in April 2011.
Iraq’s mobile sector is one of the most lucrative emerging markets in the region. “Iraq is one of the big markets with big potential,” says Ray Hassan, Ericsson’s president of GCC countries. The Swedish telecoms equipment provider has been working with Korek since 2003.
Iraq’s mobile phone sector is set to become more competitive with the introduction of a part state-owned fourth telecoms provider. It will be the country’s first third-generation operator. The Ministry of Communications is due to choose its partner early 2011. Enthusiasm among bidders has died down due to the ongoing delays. According to the ministry source, the frontrunner at the moment appears to be Turkey’s Turkcell.
Korek is a shared limited company established in 2000 by businessman Sirwan Mustafa. It paid $1.25bn in 2007 for a national licence.