25 Aug 2020

Iraq’s 4G Internet Service Might Be Hindered by A Political Controversy

Last month, Iraqi government renewed licenses of the three major telecom operators (AsiaCell, Zain Iraq and Korek) for 5 more years in addition to an extra 3 years extension as compensation for damages the ISIS war caused to the companies’ facilities and sites. The license-renewal decision, sparked a big political controversy, and is conditional on improving internet services to 4G, which is very needed given the poor connectivity and desperate needs to improve private sector businesses enabling an environment in the country. This article is going to shed the light on the controversy around the renewal decision that might hinder launching the 4G services.
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Currently, Iraq’s three operators hold licenses for 2G and 3G airwaves with TeleGeography notes set to expire in 2022. The renewal decision for 8 more years without enjoying enough transparency in the contract raised some MPs and politicians’ doubts, accusing the cabinet for facilitating an elicit deal and wasting public revenue instead of forcing the operators to pay back their debts and late penalties. The license fee is $233,674,667.2 per each company, with the addition of another amount that will be calculated later, on the additional frequencies.

Shiraz Jalal
Shiraz Jalal

is business analyst in ICPAR. Her research focus is on Iraqi private sector and labor market. She holds executive master of Business Administration from University of Kurdistan Hewler.

 Outlining its plan, the Iraq’s current cabinet stipulated that in exchange for the extension, operators must pledge to first launch 4G services by early 2021; second, they must pay off half of their debt burdens. However, the renewal decision made several MPs and parliamentary committees call on the government to make the companies payback all their debts. While the Iraqi government set June 6, 2021 for national election, the political controversy might lead to preventing the license and hinder the telecom operators’ efforts to launch the 4G services.

Sparking Political Controversy

Thabet Al-Abbasi, Head of the Parliamentary Integrity Committee stated that a lawsuit has been filed to prevent the renewal of licenses and operators will be obligated to fully payback all their debts with its interests and late penalties. Similarly, a member of the Parliamentary Finance Committee, Majed Al-Waeli, submitted a request to the Presidency of the House of Representatives with the signatures of approximately 100 MPs to reject the renewal decision. On August 25, 2020, based on a lawsuit, Al-Karkh Court in Baghdad ordered to suspend all the procedures of renewing and extending work-license of the major telecom companies.   

The Integrity Committee, in a public announcement, stated, “We are surprised by the cabinet’s decision to renew the licenses of mobile phone companies despite their poor performance during the past period, considering their outstanding debts owed to the public treasury.” It also stated, “We were surprised by the set of a requirements to pay only 50% of the outstanding debts owed by them. We were waiting for the government to enforce the operators to pay their full outstanding debts with their interest and late penalties, as Iraq is going through a stifling financial crisis. This money can be used as a source of revenue”. This is to call on the Council of Ministers to reconsider the renewal decision and follow up the lawsuits in this regard through the legal division of the Media and Communications Commission (MCC) and prioritize “Iraqi citizens’ national interests”.

Meanwhile, the Parliamentary Media and the Communications committee also called on PM Mustafa Al-Kadhimi to cancel the renewal decision till the contract with the operators is studied and transparency will be provided to the public. The committee along with a few members of the Parliament, submitted complaints to the Public Prosecution, the Court of Appeal, and the President of the Supreme Judicial Council, trying to prevent the operators working based on the renewed licenses.

After the official claims from the MPs and parliamentary committees, the first Deputy Parliament Speaker Hassan Karim Al-Kaabi in an official letter recommended the cabinet to suspend its renewal license decision for the telecom operators, responding to the MPs’ demands.

Contrary to the growing parliamentary opposition, the Media and Communications Commission of Iraq (MCC), a public institution, defended the decision of the cabinet by an official statement, issued on July 9, 2020, to state, “In light of the ongoing controversy regarding the extension of licenses for the mobile telecom operators in Iraq, the MCC would like to clarify to public opinion that the details and terms of the extension took into account national interests and keeps pace with modern technologies in the world of communications”. 

MCC insisted that the contract with the operators is based on the Iraqi constitution and laws; the contract is a result of a long-term analysis considering the public interest requirements of economic growth. It also illustrated that granting three more years license as compensation for the ISIS war damages is not for free, but at a discount rate. 

According to the MCC’s statement, the license-renewal decision was made based on certain criteria such as their share of GDP, the licensing period, the amount of the frequency spectrum, the regulatory wage, the availability of infrastructure, taxes, and fees. It also considers other contractual concessions (international telecommunications services and infrastructure) and the additional operational costs compared to neighboring and regional countries in addition to some requirements of the operational environment (electricity, protections, infrastructure) in the Republic of Iraq.

Responding to the mounting critiques, PM Al-Kadhimi stated that his government was trying to provide 4G service by the end of 2020. He also mentioned the tough trade-off between interests of the telecom operators and MPs that made him get the companies fully committed to the Iraqi regulations and government in return for the license renewal.

Behind the Controversy 

Not-renewing the license means the 4G cannot be launched. It will finally affect Iraq’s National development planning strategies and further deteriorate already poor business enabling the environment to slow down the economic activities that depend on connectivity.

Given the endemic corruption in Iraq’s state institution and the overwhelming populist trend, it is unlikely the deal would be redesigned in favor of Iraqi customers and telecom operators. The controversy, so far, has divided the politicians into two groups. First, those who seek public and consumers’ interests for clear political reasons, but it is not clear they properly understand the tough business environment the telecom operators have survived in; ultimately, they might miscalculate an economic viability for the both government and the operators.

Second, there are some blocks and MPs who criticize the license renewal decision just to score points against the PM Kadhimi’s cabinet. This group unlikely offers anything to add to the deal except for making the tough business environment even harder for the operators.

Immad Muhammad, political analyst, believes that “the conflict between the political blocs and the prime minister is not technical but rather has political dimensions, as these blocs, such as Al-Fateh and State of Law, are trying to score against PM Al-Kadhimi.

Given the vibrant political controversy, there are some concerns about the telecom operators’ ability to launch the 4G service in 2020. The license renewal decision would be taken to the expected election campaigns and then causing bureaucratic hinders for the companies, while the 4G services are needed to provide high speed connectivity for e-business. 

Policy recommendations: 

There are two government bodies that oversee telecommunication licensing in Iraq – the MCC and the Ministry of Communications (MoC). The MCC is the primary regulatory body in charge of promulgating policy for frequency management, and licensing wireless and telecommunication services. It is also authorized to regulate the operators according to Iraq’s constitutional article of 103. To avoid such a controversy and provide, guarantee consumers’ rights, and provide a proper environment for the telecom operators, Iraqi authorities need to take the following steps:

1-       MCC should pursue full transparency regarding the deals based on which the new licenses were awarded to the companies.

2-        In case the cabinet would enforce to cancel out the license renewal, the contract can be renewed in two phases: First to extend the current contract which is set to be expired in 2022, for another year so the operators can keep providing their telecommunication services and connectivity to Iraqi citizens, winning time to broker a viable deal in which everyone will be better off. Second, the authorities can issue a tender for the 4G services, so the operators can compete to win the deal in a transparent and proper business manner;

3-       The telecom operators must be obliged to payback all the liabilities based on a viable and fair time schedule. The debt payback should not be in a way that affects the companies’ capital investment to pursue the 4G services;

4-       The government must protect the companies from all the outlaw groups and people that usually depend on extortion. 

5-       To improve the poor business enabling environment, the telecom operators should be encouraged to provide Internet of Things (IoT) or the Information Communication (ICT) platform, supporting development of e-commerce and digital economic activities.

Regarding the telecom operators, it is a right time to calculate their damages and economic losses for all the sites destroyed during ISIS war and preview armed groups conflicts in certain provinces. Requesting fair compensation for the economic damage and revenue-loses, they can ask the Iraqi government to write-off part of their debts, or provide them license in a discounted rate. The process must be based on a clear and acceptable criterion that all the companies can be enjoyed.  

Editor’s note: The article was revised after the Al-Karkh Court’s order to suspend the procedures of renewing and extending work-license of the telecom companies in Iraq. 

*Shiraz Jalal is business analyst in ICPAR. Her research focus is on Iraqi private sector and labor market. She holds executive master of Business Administration from University of Kurdistan Hewler. 

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