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A Big Push to Expand Mobile Service in Iraq
02/03/2011
Published: March 2, 2011

DUBAI — The International Finance Corp. has provided a $400 million, seven-year debt facility to Zain Iraq, the largest mobile phone operator in Iraq, to expand its telecommunication services and promote job creation.

Mobile phone use in Iraq has grown strongly in recent years, with the number of subscribers rising to over 21 million last year from about 400,000 in 2003, according to data from I.F.C., the private lending arm of the World Bank.

Iraq’s mobile penetration is now estimated at 77 percent, after rising steadily since 2003 when mobile services were first introduced in the country.

Still, in comparison to Zain’s operations in neighboring countries like Bahrain, Saudi Arabia, Jordan and Kuwait — all of which have nearly 100 percent penetration rates — Zain Iraq’s rate remains the lowest, according to the company’s data.

“This points toward continued access gaps, as well as significant growth potential,” said Dimitris Tsitsigaros, I.F.C.’s director for the Middle East, North Africa and Southern Europe. “The growth of the telecommunications sector is contributing to the diversification of Iraq’s economy, which is a key objective of the government of Iraq.”

Support for fragile and conflict-affected countries, like Iraq, is one of the World Bank’s strategic priorities, especially if it helps to improve the competitiveness of the private sector and to create more jobs.

“In such environments, where the movement of people and goods is complicated, access to reliable telecommunication services is key for economic activity and personal safety,” Mr. Tsitsigaros said.

One of I.F.C.’s goals is to support economic integration in the Middle East and North Africa by facilitating cross-border investments within the region, especially involving member countries of the Gulf Cooperation Council. “This investment fits this strategy,” he added.

I.F.C. started working with Zain on the facility for Zain Iraq about a year ago, Mr. Tsitsigaros said. Despite strong growth in the telecommunications sector in recent years, operators, including Zain, were having difficulty securing long-term financing for their networks. Country risk and a weak business environment were major obstacles to both foreign investment and commercial lending in Iraq. To circumvent those problems, Zain turned to I.F.C. to help secure alternative financing sources.

The Zain Iraq financing plan was put on hold last summer when Zain itself went through several operational changes, including a strategic refocusing on its core markets in the Middle East and, as a consequence, the divestiture of its African assets. Work on the plan resumed in the autumn of 2010, and the deal was closed last month.

The $400 million long-term debt facility includes a loan from I.F.C. itself of $155 million, an additional $50 million loan committed by Ahli United Bank, and four syndicated parallel loans totaling $195 million by Proparco, Infrastructure Crisis Facility, Deutsche Investitutions and the Netherlands Development Finance Co.

“The financing comes at a vital stage of the mobile operations business growth cycle as it expands to serve a relatively low-penetrated — yet high potential — mobile market,” Nabeel bin Salamah, Zain Group’s chief executive, said.

The company expects to add over four million Iraqi mobile phone users in the next five years, expanding its customer base to nearly 20 million subscribers in a country that has one of the lowest mobile penetration rates in the region.

Many of these new users are expected to be in some of Iraq’s poorest areas, including Anbar, Diala and Salahuddin provinces. Zain Iraq currently provides mobile services to 12 million customers, representing over 50 percent of the country’s mobile phone market.

The company plans to use the credit line from I.F.C. to repay existing loans, and to expand and upgrade network systems, according to Emad Makiya, Zain Iraq’s chief executive. He said its main strategic goal would be to increase coverage to Kurdistan in the north.

A Big Push to Expand Mobile Service in Iraq -  Source


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