Dec 04 2011
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Telecommunications market in Iraq: Poor services and need for development
Taxes and royalties imposed to maintain the companies' infrastructure
This market suffers from many problems: high rates of the services provided, weakness of relay networks, the control exercised by the State on the operating networks, the taxes and royalties imposed on these companies, and the administrative corruption that had a negative impact on this market's investments.
The Iraqi Government hopes to issue a new law that separates the overlapping authorities of the official bodies in controlling this market, and to issue a fourth mobile phone license by the beginning of 2012, which may be a glimmer of hope in the development of investment in the telecommunications market in Iraq.
A study conducted by the Iraqi National Investment Commission indicated that the telecommunications sector in Iraq was very affected by the economic sanctions over the twelve years preceding 2003. During this period, the quick progress of the telecommunications market in Iraq was not properly exploited. Iraq was laggard in keeping up with the global telecommunications standards, the fixed-line phone system was very limited and the concept of telecommunications market was absent in the whole country.
A study by the National Communications and Media Commission of Iraq stated that there are three telecommunications networks in the country: Zain Iraq , a unit of Zain Kuwait , Asiacell, a subsidiary of Qtel (Qatar Telecom), and Korek Telecom, partly owned by France Telecom and Kuwait logistics firm Agility. Zain and Asiacell operate GSM networks in the southern, central and northern Iraq, while Korek operates a GSM network mainly in Kurdistan. Zain is currently considered the largest mobile provider in Iraq after acquiring Iraqna (from Orascom) for USD 900 million in 2008, and it has a subscribers' base of more than 10.2 million users. Furthermore, there are two small regional operators of telecommunications, Santel and Mobitel, operating in Kurdistan.
The State Company for Internet Services (SCIS) is the sole provider of the internet service in Iraq, according to previous statements of the company. The internet service fees in Iraq are the highest among the Arab countries and the neighboring countries, because the neighboring countries are linked to international outlets, i.e. a submarine cable or artificial satellites, which is not the case of Iraq. The most prominent private companies that provide good services are EarthLink and Dijlh Net. There are other companies that offer services through ground cable, such as ICPU and SIDI.
Another study issued by the United Nations Inter-Agency Information and Analysis Unit, about the Iraqi plan in the telecommunications field until 2015, indicated that the Government is seeking, in the coming period, to increase the number of fixed lines to 11.2 telephones per one hundred people, compared with 6 telephones currently. It is also seeking to increase the number of mobile telephones to 40 per hundred people in 2015, according to Table 1 and Table 2.
The study indicated as well that the telecommunications sector in Iraq is facing several problems, namely: overlapping functions between the Ministry of Communications and the National Communications and Media Commission of Iraq (NCMC), the multiplicity of decision-makers within the Ministry of Communications, and the differences in setting priorities by each authority. This has created some difficulty in carrying out the maintenance works of the landline network in the hot areas, and prevented the NCMC from monitoring the performance of the private sector in the telecommunications field, particularly the mobile phone companies, along with the continuous vandalism occurring to the telecommunications infrastructure, particularly the landline network, in addition to the lack of optimal use of the frequencies, lack of control on international mobile phone calls and on the Internet service through the access gateways.
Dr. Ahmad Saffar, Professor of Economics at the University of Dohuk in Iraq, confirmed that the telecommunications market in Iraq is crowded by several companies that offer low priced but bad quality services, because of the poor coverage, lack of towers and the long distances between the towers. This has obliged many Iraqis to have three or four different lines to obtain permanent service.
He added that there is a lack of interest by these companies in the quality of the services provided to the consumer, as the latter pays extra minutes for the calls made in addition to the original period of use, attributing that to the non-activation of the Consumer Protection Law in Iraq. He pointed out that security has a very large impact, as the security troubles led to an increase in the calls' fees, where the telecommunications companies are required to pay monthly taxes and royalties to terrorist organizations in order to protect their towers and prevent any terrorist acts against their base stations.
He added that Iraq does not need several new networks, only one network or two complementary and effective networks that are more advanced than the existing networks and the services provided currently, are sufficient.
Concerning the Internet, he said it is very slow and unreliable, especially in institutes and universities. He noted that the telecommunications problem is due to the administrative and political corruption that serves the interests of certain categories in the Government.
The private sector can play an important and extensive role in the telecommunications, as it is a profitable and fast-yielding activity, as per a study conducted by the NCMC which indicated that there are many investment opportunities in this field. In addition to the three national mobile licenses issued in 2007, the Ministry of Communications suggested to issue a fourth license. It is also currently considering a wide range of options for the fourth national license as some investments will be required through the mobile industry, ranging from retail service, to infrastructure and equipment.
Iraq requires also a proper infrastructure for the fixed line and the fiber network that needs major reform and expansion. The Ministry of Communications offered the private investors and suppliers to enter this sector. The opportunities include projects for the repair and expansion of Iraq's existing network, as well the supplying and establishment of new phone switches. Further, the study pointed out to the weakness of the Iraqi internet market, and added that there are opportunities to provide Iraqi people with internet services. But the greatest obstacle delaying the expansion of internet services in Iraq is the quality and infrastructure speed of its telecommunications.
Abdulmajid Abdulhamid, Deputy Director General and Assistant Director of Iraqi Telecommunication and Post Company, pointed out that the telecommunications market in Iraq is already suffering from some problems that emerged after 2003, such as the overlapping between some of the authorities' responsibilities towards the companies operating in this field. There is indeed some overlapping between the Telecommunication and Post Company and the NCMC. The Ministry of Communications is always trying to coordinate and set the tasks and responsibilities entrusted to each authority. It is also considering the issue of a new law that defines the functions of each authority separately. He added that there are other technical problems, including the geographical distribution of the mobile phone companies, in other words, a company covers the south, another covers the north and another the center, which is unfair, because the consumer has to subscribe in more than one network to have the desired quality of the provided service, in addition to the weak coverage at certain areas because of the poor security situation.
Abdulhamid added, concerning the role of the NCMC and the Government in controlling the mobile phone companies, that there is a complete absence of the Government's control since several years, but recently we have set good mechanisms for the monitoring and follow-up of all the networks' performance. We have also signed an agreement with the mobile phone companies requiring them that all communications shall pass through the infrastructure networks owned by the Ministry and its affiliated authorities. This would increase the supervisory role on these companies' work.
The Iraqi Government, in a draft law on telecommunications, demanded the three existing mobile companies to launch initial public offerings in the Iraq Stock Exchange, according to the Iraqi Law and under the operating licenses worth USD 1.25 billion and valid for 15 years. A new telecommunications law is expected to be issued in one month.
Abdulhamid added that the company is still preparing the studies related to the fourth license expected to be issued by the end of this year. There are some technical points that hinder the issue of this license, such as the percentage of each authority in the same, stressing that the Ministry is currently considering offering up to 20% to Iraqi citizens inside the Iraqi Capital Market. He added that he does not believe that the Government will issue a new license after the fourth, because the Iraqi market is saturated, and we are currently working on improving the provided services.
Nabil Gharib, an Iraqi researcher in the telecommunications field, confirmed that some explosions are taking place in the telecommunications towers, especially in the Sunni regions like Anbar, Tikrit and Hawijah, in order to obtain more privileges from the operating companies. He pointed out that all the networks operate in regions covering all of Iraq, but their coverage is not effective in all areas. For instance, Asiacell covers the whole country but its transmission is weaker in Basra. He added that there is some interference caused by the American Forces and the Government, particularly after the bombings that were occurring from time to time. One of the new license's conditions is that each company shall sign an agreement with the Government that guarantees the maintenance of the country's public security for the latter, which means making the network available for control at any time in the interest of the public security.
By: Mohamed Abdulzaher
© Zawya 2011
© Copyright Zawya. All Rights Reserved.
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