Boston, MA -- (SBWIRE) -- 04/15/2014 -- The Iraqi mobile sector recorded double-digit growth over the 12 months to December 2013. This supports our outlook for continued subscriptions growth during our five-year forecast period which has been extended to 2018 in this quarter's update. However, we expect increasing market saturation, with the penetration expected to reach 100% by 2015, to increase downward pressures on ARPUs and, consequently, operators' top line and bottom line financial figures. We therefore opine that the country's three mobile operators must expand their portfolio of non-voice services in order to sustain revenue growth, pending the allocation of 3G spectrum by the government. Although growth in the fixed telephony and data sectors remains stifled, we expect the implementation of various network infrastructure investment plans by the government and national fixed-line operator ITPC to boost growth over the medium-to-long term.
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- The mobile market grew by 14.4% year-on-year (y-o-y) in FY13, compared to 14.3% in FY12.
- After relative stability, Zain Iraq and Asiacell reported a drop in ARPU in FY13. We expect this trend to continue due to competition and operators' inability to offer advanced data services.
- Iraq has one of the lowest fixed-line and broadband penetration rates in the region, at 5.6% and 0.5% respectively at the end of 2013, and we do not expect the situation to improve significantly through to 2018.
Iraq dropped one place to ninth position in BMI's MENA Telecoms Risk/Reward Ratings (RRRs), with an aggregate telecoms rating of 48.5. We forecast Iraq's economy to expand by 10.9% and 10.8% in real terms in 2014 and 2015, respectively. Despite increasing political instability, elevated fiscal spending and accelerating oil exports will ensure that the economy remains the fastest growing in the MENA region in 2014. While this bodes well for the country's private consumption outlook in 2014, we caution that government interference in the telecoms sector, which weighs on Iraq's Industry Risk score, and political instability could stifle much needed investment in mobile and fixed network infrastructure development.
Key Trends And Developments
Iraq's government plans to auction a number of 3G licences, with bids expected to start at US$307mn, in 2014. The Council of Ministers agreed in principle to auction an indefinite number of licences, according to the Communications and Media Commission (CMC). The council rejected the CMC's request for automatically granting 3G licence to the three existing telecoms operators Asiacell, Zain Iraq and Korek.
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