Orascom to form joint venture with Korek

Egypt's Orascom Telecom has agreed to a $2.2 billion joint venture with Kurdish operator Korek Telecom.

Orascom will hold 70% of the venture and Korek 30%, Orascom announced yesterday.

The venture would have immediate access to the northern region of Iraq and four million subscribers, giving it a 40% market share, the Egyptian operator said.

Korek paid $1.25 billion for one of the three Iraqi mobile licences sold last month at an auction in Jordan, replacing those awarded after the US-led invasion in 2003.

Orascom, which had operated in Iraq since 2003, pulled out of the auction in Jordan and said it would consider selling its Iraqi unit.

Korek last month said it was in negotiations with Orascom about the possibility of buying Orascom's Iraq assets, according to reports.

Orascom said there would be strong synergies from the combination of assets namely CAPEX reduction, reduction on security overhead and recruitment of resources.

"This transaction improves the returns back to the levels that reflect the risks we undertake in investing in Iraq," said Orascom chairman and CEO Naguib Sawiris. "The improved market share and the traffic generated between the two networks will increase the revenues and the margins in this very successful operation in addition to the finalisation of a 15-year licence instead of a monthly renewed licence," he added.

Orascom's Iraq network, which operates in Iraq under the Iraqna brand, could be worth as much as $1billion, according to analysts' estimates.

Iraqna has over three million subscribers, according to its network.

The country of 26 million had around eight million mobile phone users at the end of 2006, according to Iraq's telecom's regulator, and most people rely on cellphones because much of the fixed-line network was destroyed through the war.

Iraq's new licences to three operators will dramatically boost the cellular network, the country's communications minister commented after the auction.

Existing players MTC Atheer and Asiacell were the other two winners of the 15-year licences, leaving Korek as the only winner without a national network.

Korek has said it planned to invest at least $1 billion to expand its network.