CPA Iraqi Mobile Telecom Tender Conference

UNCLAS SECTION 01 OF 02 AMMAN 004931

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: ECPS JO ENV
SUBJECT: CPA Iraqi Mobile Telecom Tender Conference


1. (U) SUMMARY: CPA telecommunications officials held a
conference in Amman July 31 for prospective bidders on
licenses to provide mobile telecommunication services in
Iraq, attracting over 400 participants. During the
conference, attendees expressed frustration over the short
bid submission period, a five percent cap on government
ownership for bidders, a perceived favoritism to GSM
technology, and a lack of clarity regarding selection
criteria. Responding to these concerns, CPA officials
later extended the deadline and reissued a revised tender
on August 3. END SUMMARY

-------------- -
A CONSULTATIVE CONFERENCE
-------------- -

2. (U) CPA telecom officials David Leech, Jim Davies,
William Lane, and Dr. Daniel Sudnick, along with Iraqi
Telecommunications and Post Company executives Abdul Latif,
Walid Jallo, Luma Badir and Shakir Abdullah conducted an
Iraqi Mobile Telecommunications Tender Conference in Amman
on July 31. The conference attracted over 400 participants
from global telecommunications and consulting firms and
featured presentations on the future of communications in
Iraq, the Iraqi Telecommunications and Posts Company, and
the bid submission process. From the onset of the
conference, CPA officials declared their intention to use
the forum for an exchange of ideas between the private
sector and the CPA telecommunications team regarding the
mobile tender, and future decisions regarding the Iraqi
telecommunications arena.


3. (U) According to the tender, three licenses are to be
awarded, one each in CPA-designated north, south, and
central regions, the latter including Baghdad. The
licenses are for two years, with winning bidders required
to deposit a $30 million letter of credit with the CPA
pending the achievement of service benchmarks six months
after the contract is awarded. Successful bidders also
must pay a license fee ranging from $ 1.33 to $2.08 million
USD depend on their region to fund a future regulatory
agency. Successful bidders have 20 days following the
award of the contract to begin installing their
infrastructure.


4. (U) However, the most controversial part of the tender
was a clause which restricted bidders to those with no
larger than five percent ownership by foreign governments,
leading to concerns on the part of conference participants
that almost all Arab telecommunications firms would be
excluded from the bidding. CPA officials explained that
the Iraqi telecommunications officials wanted to avoid
substantial foreign ownership of Iraqi infrastructure, but
agreed to take attendee comments into account when
considering possible revisions of the tender document, an
examination they pledged to conduct.

--------------
ROOM FOR CDMA?
--------------

5. (SBU) Several CDMA technology providers expressed to
Econoff their frustration with the relegation of CDMA to
the 800 MHz block of the spectrum, stressing that operation
in this band would be secondary to military use and would
cause degradation in quality of service. CPA officials
explained that they were restricted by previous ITU
agreements and were unable to free up additional spectrum.
However, they stated that CDMA technology could provide a
quality mobile service even with the restrictions and
encouraged CDMA providers to compete. (Note: On the
margins of the conference, CPA officials told EconOff that
they did not expect any CDMA bids. End Note)

--------------
RULES OF THE GAME
--------------

6. (SBU) During a Q and A session, potential bidders asked
CPA officials to provide quantitative selection criteria
for the tender in order to know how to structure their bids
in a way that increases their chances of success. Leech
said that decision-making criteria included area coverage,
subscriber capacity, speed of rollout, roaming capability
and the cost to end user, but would not specify how each of
these areas would be weighed. He said a five-person
selection committee would examine bids and favor those that
took into account the social and cultural needs of the
Iraqi people. While the factors that comprise such needs
were not specified, they implied that the inclusion of
Iraqi companies and employees into bidding consortia would
increase the chances of winning the tender. (Note: The CEO
of Jordanian mobile company Fastlink, Mr. Mohammed Saqer,
told Econoff that many of his Arab counterparts assumed
that the contracts would be given to Vodaphone, Orascom and
one unspecified American company. Furthermore, he added
that his consortium would submit a bid, not because they
felt they would win, but as a political statement that
tests the transparency of the CPA decision-making process.
End Note)

-------------- --
IRAQI TELECOM PLAYERS UNITE
-------------- --

7. (U) A group of 60 Iraqis announced the formation of an
Iraq Telecommunication Corporation (ITC),which they hope
to operate as a public telephone company. The ITC
expressed its desire to participate in tender selection
process. While the composition and long-term intention of
the group is unknown, the CPA warmly received the group as
the type of private sector initiative that is needed in
Iraq.

--------------
THE CPA LISTENS
--------------

8. (U) On August 3, the CPA reissued a revised tender
incorporating many of the suggestions made during the
conference. Changes included an increased cap on foreign
government ownership to ten percent, further clarification
on performance reviews, timeline and requirements for
obtaining a national license, removal of required
experience in multiple countries with at least five
previous contracts, inclusion of a bond payments once
license is awarded, confidentiality of bids, termination
rates for fixed-line calls, regional license fees per
region, and evaluation criteria. The CPA also extended the
deadline for submission by one week until August 21, 2003.

--------------
COMMENT
--------------

9. (SBU) Citing prohibitive foreign ownership caps, the
two-year license term, and the choice of the 800MHz
spectrum status, many potential bidders claimed that the
outcome of the tender process was predetermined. Although
participants were encouraged by the CPA's willingness to
accommodate private sector concerns, many still expressed
skepticism that substantial changes would be made. At any
rate, the Iraqi mobile telecommunications license tender
marks the beginning of what will be a long, contentious,
and occasionally difficult process to rebuild Iraq's
infrastructure.
HALE