Phone companies can't connect with plan for Iraq

AMMAN, Jordan -- With much of Iraq still without basic phone service, U.S. occupation authorities said Thursday they intend to have a cellular system up and running by November. But potential bidders for the wireless licenses are complaining that the terms for the contracts are too restrictive.

"It will be, of course, an enormous step forward for the people of Iraq," said an official with the U.S.-led Coalition Provisional Authority, speaking on background at a briefing in Baghdad. "This will be the first time they ever will have had a mobile telephone network when it starts. We anticipate it being ready to go sometime in mid-November."

At a conference in the Jordanian capital Thursday, more than 300 telecommunications executives from around the globe quizzed U.S. officials on the contracts. The occupation authority in Iraq has estimated that creating a nationwide cellular network may cost up to $200 million and many potential bidders voiced concern that the two-year licenses are too brief to allow them to recoup any investment.

"Twenty-four months is really a short period," said Bashar Dahabra, a telecommunications consultant for Al Bunnia Group in Dubai, United Arab Emirates. "And after 24 months you don't know what will happen to your investment."

Another source of complaint is a requirement that no government entity may own more than a 5 percent stake in any bidder. That would effectively rule out most companies from the Middle East, where government investment in telecommunications companies is common.

"That requirement would exclude most of the network operators in the region," said Laureen R. Cook, adviser to Kuwaiti-based Mobile Telecommunications Co., which is partly owned by the Kuwaiti government.

"There are a lot of gaps in the proposal," added Farid Antoun, executive manager of Lebanon-based Setelcom, which hopes to offer support services to the winning bidders.

U.S. companies such as Motorola, Sprint, MCI Worldcom, Oracle and San Diego-based Qualcomm sent representatives to the daylong conference. But North American operators face an uphill battle in the competition due to their reliance on a wireless technology known as CDMA.

Most of the Middle East and Europe use a rival technology known as GSM. Though the standard for Iraq has not yet been selected, a GSM-based network would offer greater convenience to Iraqi cellular customers, experts say, allowing them to more easily use their phones in neighboring countries.

Iraq never had a national cellular phone service, and with much of the country's telephone infrastructure still damaged from the war, communications within Iraq remain extremely limited. In some sectors of Baghdad, neighborhood service is available, but aid workers, occupation authorities and journalists are relying largely on satellite telephones.

Last week, Bahrain Telecommunications Co. set up an unauthorized wireless network in Baghdad that allowed many in Iraq to use cell phones for the first time. But the CPA ordered the company to shut down, saying that it undermined the bidding process and that the service interfered with military communications systems.

Still, authority officials stressed the need to get cellular services up and running.

"We want quick results," said Jim Davies, communications adviser to the CPA Ministry for Transport and Communications. "Iraq needs a mobile communications system and it needs it now."

He said the CPA would not budge on the two-year term. "The CPA doesn't want to do anything that would bind a future Iraqi government," Davies said.

As for the government-investment restriction, however, Davies said authority officials would likely loosen the requirement, perhaps as soon as today. CPA officials said the rule was meant to ensure that Iraq's wireless network does not come under the influence of a foreign government. But some U.S. companies that are partnering with Middle Eastern counterparts have objected.

"The rule effectively gives an unfair advantage to the Europeans," said an executive for one major U.S. company who did not want to be identified. "A 5 percent stake doesn't give the government a controlling interest. They need to change that figure."

The United States plans to announce the winning bidders by early September. Licensees will be required to start work within 20 days of selection and post a $30 million bond to ensure that they meet six-month targets for build-out. Each licensee will start in a particular geographic region-north, central or south. But within a year, it is expected that all three will compete nationwide.