Mobile operator Zain says electronic jamming in Iraq hurts business; Etisalat bids for stake

By Adam Schreck, AP
Wednesday, September 29, 2010

Cell firm adds electronic jamming to Iraq risks

MANAMA, Bahrain — Iraq’s largest mobile operator said Wednesday that electronic jamming of phone networks aimed at thwarting insurgent attacks is hurting sales, adding another item to the list of potential risks businesses face in the war-torn nation.

The claim by Zain Iraq’s chief executive highlights the challenge confronting Baghdad as it looks to drum up foreign investment and know-how needed to help rebuild the country.

Although plenty of international companies recognize the potential for big profits in Iraq, many still believe the downsides — particularly security concerns and entrenched corruption — aren’t worth the risk for now.

And even companies such as Mobile Telecommunications Co. — the Kuwait-based company known as Zain — that are invested heavily in Iraq find that doing business there can carry hidden costs.

Emad Makiya, chief executive of Zain’s Iraq division, said the firm is under pressure from authorities to list its shares on Iraq’s fledgling stock exchange as a condition of its mobile license. He estimates that Zain Iraq is losing as much as 30 percent of potential revenue because of outages caused by electronic jamming equipment.

“It’s affecting our revenue tremendously,” Makiya told reporters in Bahrain. “Whenever there’s a threat, the jamming will be turned on.”

American forces have for years used electronic jamming to protect against homemade bombs, some of which were triggered remotely by cell phones. But the disruption can cause mobile phones to stop working altogether.

Makiya said he believes Iraqi forces are now relying heavily on jamming equipment as they assume a greater security role.

An Iraqi interior security official, speaking on condition of anonymity, disputed that.

“Neither police nor (Iraqi) military forces have capabilities of jamming cell phone networks,” the official said.

Makiya spoke at an Iraq investment conference in Manama. He said his company remains on track to expand its service to Iraq’s northern Kurdish region in January.

Separately on Wednesday, Emirati telecommunications company Etisalat said is has made a bid for a stake in Zain. It didn’t provide details on the terms of what it called a “preliminary conditional offer.”

Results of a survey released at the conference showed that security concerns remain the biggest perceived risk to doing business in Iraq among executives considering investing in the country.

Despite a significant drop in insurgent attacks since 2007, half of the 367 respondents to the survey — carried out by the Economist Intelligence Unit — said ongoing violence means doing business in Iraq will remain too risky for some time to come. No margin of error was given.

Corruption, a lack of infrastructure, and a cumbersome bureaucracy left over from Saddam Hussein’s regime also ranked high as difficulties.

The results underscore the challenges Iraq faces as it struggles to attract needed investment to rebuild, after more than seven years since the U.S.-led invasion.

Investors say the country has huge potential, largely due to its estimated 115 billion barrels of crude oil — the world’s third-largest proven reserves. The 2.4 million barrels of oil Iraq produces on an average day accounts for 95 percent of the country’s revenue.

But like many other parts of Iraq’s economy, the oil industry is hobbled by creaking infrastructure — the result of decades of wars and sanctions — and occasional insurgent attacks that cut production.

Iraq last year awarded 12 oil contracts to international oil companies. Oil Minister Hussain al-Shahristani wants to push production levels to 12 million barrels per day by 2017, though many analysts say that target is overly ambitious.

Associated Press Writer Hamid Ahmed in Baghdad contributed to this report.

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