Zain Iraq

zain-logo 3


Country Iraq
Sector Telecoms
Signing Date 24 February 2011
Total Project Cost US$ 1.069B
ICF Debt Pool Exposure US$ 50M
IFI Exposure US$ 400M

Project Description

The Atheer Telecom Iraq Limited (“Zain Iraq”) project involves the strengthening and expansion of Zain Iraq’s cellular telephone network in Iraq, where the company has been operating since 2003. This landmark project is supporting economic growth and expanding access to telecommunications in Iraq, especially for remote populations. A reliable telecommunication service is instrumental to the growth of Iraq’s economy as it seeks to diversify itself outside of the oil & gas sector.

Financing Structure

The new long-term debt includes an US$ 155M IFC A Loan, US$ 50M IFC B Loan, and US$ 195M in parallel loans. The participants in the parallel loans are FMO, DEG, Proparco and ICF Debt Pool.

Infrastructure Component

This investment will support the strengthening of Iraq’s communications infrastructure as well as the extension of mobile networks into more remote and poorer areas of the country.

Investment Rationale

  • An experienced operator: Zain Iraq has been operating successfully in Iraq since December 2003.  It is currently the leading mobile operator in the country with twelve million subscribers and a market share of over 50%.  With its has proven its ability to build and grow its operation profitably, Zain Iraq expects to add over 4 million Iraqi mobile users over the next 5 years and grow its customer base from more than 20 million subscribers.
  • Favorable market outlook: Spurred by the issuance of private telecom licenses, Iraq’s mobile sector has flourished in recent years, with the mobile subscriber base growing more than 4 times from a base of 443,000 in 2003.  This dramatic growth notwithstanding, Iraq’s mobile penetration rate of 70% continues to lag behind that found in neighboring countries such as Iran (96%) and Jordan (97%), pointing to significant growth potential.

Development Impact

The project will expand the access to telecommunications services by expanding coverage and adding new subscribers, many of them experiencing access to communication services for the first time. Increased competition will lead to further decline in telephone access tariffs and to product and service innovations. Additionally, improved access to mobile telephony will facilitate the growth of small business and promote entrepreneurship.

Zain Iraq’s investment program will also create employment opportunities in Iraq at both the company and distribution levels. Zain Iraq currently employs approximately 1,355 employees directly and significantly more employment opportunities exist indirectly.

Additionality

Iraq remains off limits to most lenders, clearly limiting the potential pool of capital available for this Project.