Iraq's fixed-line incumbent telecoms operator, Iraqi Telecommunications and Post Company (ITPC), has awarded a contract to Swedish equipment vendor Ericsson to expand its wireline network and roll out IP technology as part of a next generation network transition process. This development bodes well for fixed-line services in Iraq, especially the underserved broadband sector. However, we retain the view that the sector's full potential can best be reached through competition .
|Iraq Fixed-Line And Broadband Penetration|
ITPC has a monopoly over wireline services in Iraq. The company has faced a myriad of challenges over the past decade, including war and insecurity, underinvestment in network development and, more recently, intense competition for voice and data subscribers from mobile voice and wireless data service providers. BMI notes there are prospects for increased competition in the data services market with the launch of the Gulf Bridge International (GBI) cable system, which could boost the operations of WiMAX operators, and the rollout of 3G-based data services by the country's mobile operators when licences become available.
BMI believes ITPC's network investment plans will go a long way to repositioning the operator in Iraq's telecoms sector. The project is expected to create capacity for additional 4mn subscribers and provide enhanced quality of service to subscribers. The company claims to have around 1.7mn connections, although previous statements by the communications ministry suggest that only a fraction of those connections may be active. The Iraqi government has set an ambitious target of boosting the incumbent's subscriber base to around 9mn by 2015, according to the deputy minister of communications in charge of technical affairs, Amir al-Bayati. The likelihood of hitting that target is slim. However, we believe the contract award, which consolidates the incumbent's long-term relationship with Ericsson, is a step in the right direction. ITPC and Ericsson have worked together since 2007 on wireline network development, transmission microwave and transmission DWDM projects.
We expect ITPC's network expansion and modernisation project to have the biggest impact on Iraq's grossly underserved broadband market. The transition to IP network will enable the operator introduce next generation broadband services, as well as support various wireless services from alternative operators. This development poses an upside risk to our growth outlook for the Iraq internet sector, which currently envisages a broadband penetration of just 1% by 2017.