US embassy cable - 03AMMAN4931

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 
 
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A CONSULTATIVE CONFERENCE 
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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. 
 
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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) 
 
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RULES OF THE GAME 
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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) 
 
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IRAQI TELECOM PLAYERS UNITE 
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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. 
 
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THE CPA LISTENS 
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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. 
 
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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