• IRAQ MOBILE LICENCE AUCTION FINALLY GETS UNDERWAY
  
• TELEKOM MALAYSIA TO SELL TM PAYPHONE TO PERNEC
  
• KPN IN TALKS TO ACQUIRE TELE2 BELGIUM
  
• PT ANNOUNCES STRATEGIC PARTNERSHIP FOR SUB-SAHARAN AFRICA
• VIMPELCOM ANNOUNCES ACQUISITION OF A CELLULAR OPERATOR IN IRKUTSK REGION
• VERIZON WIRELESS ACQUIRES ASSETS OF RAMCELL
• OTHER M&A ARTICLES

The long-awaited auction of permanent operating licences for mobile telecommunications services in Iraq should open in Amman, Jordan, tomorrow, according to a statement from the Iraqi National Communication and Media Commission.  Local reports indicate that five companies will be competing for the three regional licences covering northern, central, and southern Iraq, while a fourth licence has been reserved for use by the state, most likely for incumbent operator Iraqi Telecommunication & Post Company (ITPC).

It now seems certain that most - if not all - of the three existing temporary licensees will prove successful in the auction, following the decisions of regional powerhouses Emirates Telecommunications Corp (Etisalat), Bahrain Telecommunications Company (BATELCO), and Qatar Telecom (Q-Tel) not to bid after all.  South Africa's MTN Group Ltd was also expected to have submitted a bid, but now appears to be out of the running.  Many of those companies that have now pulled out have done so in order to focus on other licensing and acquisition opportunities elsewhere in the Middle East and North Africa (MENA) market.

Iraq's mobile telecommunications market is dominated by three regional cellular operators that have been progressively expanding their networks nationwide.  These networks are operated under short-term licences that were due to have expired at the end of 2005, but which were extended until the end of 2006 while the national regulatory authority prepared an auction of up to four permanent licences.  The short-term licences have recently been extended to September 2007 due to delays in launching the auction of the permanent licences.

The existing operators are Wataniya Telecom-owned AsiaCell (serving northern Iraq), Orascom Telecom-owned Iraqna (serving central Iraq), and Mobile Telecommunications Company (MTC)-owned MTC Atheer (serving southern Iraq).  Two other operators are active in northern Iraq, and mainly serve the Kurdistani peoples of that region: Korek Telecom and SanaTel also operate under provisional licences and are expected to bid for the new licences in in order to stay in business.  If successful in its bid, Korek Telecom would likely take over SanaTel.

Although MTC Atheer, Iraqna, and AsiaCell have proved hugely successful in meeting basic and advanced service requirements, there is no guarantee that they will win any of the new 15-year licences, as Korek Telecom and potential new entrant Turkcell Iletisim Hizmetleri AS are also said to be committed to bidding in the new auction, which will close on Saturday.  The winning bidders will take over the existing cellular networks from the previous temporary licensees in those instances where an existing operator proves unsuccessful in the auction.

There were approximately 1.289 million cellular telephony subscribers in Iraq at the end of 2005, a figure that had risen to 8.842 million by the end of 2006, all served by the three main operators, Asia Cell, Iraqna, and MTC Atheer.  Verifiable subscriber figures were not obtainable from Korek Telecom and SanaTel; it may be that those companies were serving no more than 400,000 subscribers at the end of 2006.

The cellular operators will meet with increasing competition from a number of regional wireless local loop (WLL) operators, licensed in September 2006, which are deploying fixed wireless access (FWA) network based on CDMA, EV-DO, and WiMAX technologies.  National WLL licensees include Kalimat Iraq Corporation, a group led by Munir Sukhtian Group Co Ltd, and incumbent ITPC.  Regional WLL licensees are Baghdad Cooperative, Iraqtel, and Iraq Telecom Consortium.

Following the overthrow of the Saddam Hussein-led regime in April 2003, Iraq's interim government authorised several different service providers and operators to provide a wide range of basic voice and data services.  This approach has now been abandoned in favour of a more structured and considered approach whereby fixed-line, mobile communications, and data services providers are formally licensed.  This has been greatly helped by the establishment of a national regulatory authority, although continued attacks by insurgents against government and coalition forces attempting to bring peace and stability to the country continue to inflict damage on the communications infrastructure and hamper foreign companies' attempts to rebuild the fixed-line network.

Further information on Iraq's telecommunications market is included in a special report published by ITI in March 2007, entitled "Opportunities for Telecommunications Equipment and Services in the Middle East".  Additionally, ITI publishes separate profiles on the operators MTC, Orascom Telecom, and Wataniya Telecom as well as Etisalat.

Telekom Malaysia Bhd (TM) has entered into a sale and purchase agreement to dispose off its entire equity interest in its wholly-owned subsidiary, TM Payphone Sdn Bhd, for a total consideration of MYR22 million (approximately US$6.5 million) to Pernec Corporation Bhd, a joint venture between Permodalan Nasional Bhd and NEC.

The disposal supports the strategic intention of TM to streamline its operations and focus on its role as a mainstream network facilities and service provider.

TM said that TM Payphone, under the ownership of Pernec, will operate and maintain a minimum of 60,000 payphones - utilising TM phone lines - within a year of the deal being completed.

TM Payphone had 50,000 payphone sets in operation as at July 31.

TM said that TM Payphone posted losses after tax of MYR34.5 million for the year ended December 31, 2006, and MYR11.4 million for the six months ended June 30.

"On the assumption that the proposed disposal is completed by the end of 2007, it is expected to have a positive effect on the financial performance of Telekom for the year ending December 31, 2008," Telekom said.

Royal KPN NV is in talks to buy Tele2 AB's Belgian operations for approximately €100 million, in an effort to further strengthen its operations in that country, according to Dow Jones Newswires.  KPN said that the talks with Tele2 Belgium "may or may not lead to an acquisition".

KPN also said it will accelerate its €1 billion share buyback programme and denied reports that say it is bidding for Bouygues Telecom.

According to the report, Ad Scheepbouwer, Chief Executive Officer, stated: "We have just announced an intended bid for Getronics and are working on opportunities to strengthen our Belgian business by means of smaller fill-in acquisitions.  This is not the time to entertain possibilities of a move to acquire Bouygues Telecom."

Portugal Telecom SA (PT) has announced the establishment of a strategic partnership with Helios Investors LP, a fund advised by Helios Investment Partners LLP, for the sub-Saharan telecommunications market.  Under the terms of the agreement, Helios initially acquired a 22% stake in Africa Holding, the holding company that will aggregate all of PT’s current interests in sub-Saharan Africa.

PT has long identified Africa as a key strategic market, offering attractive growth opportunities and potential for additional value creation.  Africa is expected to be one of the fastest growing telecommunications markets in the world over the next three to five years.  With a total population of 900 million, Africa reached approximately 200 million mobile subscribers at the end of 2006, equivalent to a penetration of 22%.  It is expected that total mobile customers in Africa will grow at more than 10% per annum until 2010, which represents over 100 million net additions in the period.  Approximately three quarters of this growth are expected to be concentrated in 10 major markets in Africa, of which six are located south of the Sahara, namely South Africa, Nigeria, Congo, Tanzania, Angola and Kenya.

The common objective of the strategic partnership announced by PT and Helios is to create and further develop a unified, coherent, multi-country telecommunications service provider across sub-Saharan Africa, by combining certain assets and the telecommunications strength of PT with Helios’ African knowledge, contacts and expertise, as well as its financial and telecommunications management know-how.  Apart from managing the current portfolio of assets, Africa Holding will also focus on selectively expanding the footprint in the region, with the view of creating additional value for its shareholders.

Helios is an African private equity firm operating in sub-Saharan Africa with over US$450 million of assets under management.  Helios was founded in 2004 by Babatunde Soyoye and Temitope Lawani to pursue a full range of investment types, including business formations, growth equity investments, structured investments in listed entities and large-scale leveraged acquisitions in Africa.  The company's investors are leading institutions from Africa, Europe and the US, as well as governmental agencies.

Under the terms of the agreement, Helios initially acquired a minority stake of 22% in Africa Holding for a total consideration of US$171 million (€125 million), of which US$11 million will be paid in the form of additional dividends.  PT has also subscribed to a financing facility issued by Africa Holding in the amount of US$450 million.  As a result, the implied enterprise value for 100% of Africa Holding amounts to US$1,225 million (€897 million).  Based on 2006 reported accounts, the EV/EBITDA multiple paid for the 22% minority stake is 6.8x.  The net capital gain resulting from this transaction should amount to approximately €50 million and is expected to be booked in the third quarter of 2007.

Africa Holding will aggregate all of PT’s holdings in sub-Saharan Africa, including: Angola - Unitel (mobile), 25%; Guinea-Bissau - Guinétel (mobile), 55%; Various - Directel (directories), 100%; Namibia - MTC (mobile), 34%; Guinea-Bissau - Guiné Telecom (fixed), 40%; Botswana - Mascom (mobile), management contract; Cape Verde - CVT (integrated), 40%; Mozambique - Teledata (data), 50%; São Tomé e Príncipe - CST (integrated), 51%; and, Angola - Multitel (data), 40%.

Africa Holding counted with a total customer base of 2.9 million at the end of 2006, which represented an increase of 58% y.o.y.  At the end of June 2007, total customers reached 3.4 million.  Considering 2006 reported figures, proportionate revenues and EBITDA amounted to €215 million and €131 million, respectively.  The creation of Africa Holding should not result in any change in the consolidation method used by PT for its African holdings.  Currently, Africa Holding holds a direct stake in MTC, with the transfer of the remaining holdings owned by PT being subject to approval by the relevant regulatory authorities.

Financial and Operating Highlights (2006)

The board of directors of Africa Holding will be composed of seven members, of whom four are designated by PT, two by Helios and one by both parties.  The Chairman will be selected by PT and the Vice Chairman by Helios.

PT believes that the strategic partnership with Helios, through the creation of Africa Holding, should fulfil several objectives, namely: crystallise the value of PT’s portfolio of African assets; access future funding, through Africa Holding, in order to selectively expand the footprint in the region; leverage on the financial and operational competences of both partners; strengthen the relationship network and know-how in the region; reinforce the multinational profile of Africa Holding; and, retain management control of Africa Holding, allowing PT to continue consolidating the assets currently in the portfolio.

Vimpel Communications (VimpelCom) has announced that it has acquired Closed Joint Stock Company Corporation, Severnaya Korona (CSK), which holds GSM 900/1800 and D-AMPS licences covering the Irkutsk region.

The company acquired 100% of the shares of CSK for approximately US$232 million.  The sole shareholder of CSK was Tele2 Sverige AB of Sweden, a subsidiary of Tele2 AB.

CSK’s GSM-900/1800 and D-AMPS licences cover a territory with a population of about 2.5 million.  According to the VimpelCom's estimates, the CSK subscriber base as of the end of June 2007 amounted to over 571,000 subscribers (including more than 3,000 D-AMPS subscribers), which accounts for 21.5% of the entire cellular market in the Irkutsk region.  According to independent surveys, the penetration level of cellular telecommunications in the region is about 107.6%.

Nikolai Pryanishnikov, VimpelCom’s Executive Vice-President and General Director for Russia, noted: "We are happy to announce our entry into one of the most important regions of the Far East and Siberia.  The acquisition of CSK substantially enhances our position in Russia and expands the communication options available to existing and new subscribers.  We plan to integrate the acquired company into VimpelCom’s network as soon as possible and offer the local population Beeline’s high level of service.”

Following the acquisition of CSK, VimpelCom's operating area covers 75 regions of the 85 administrative regions of the Russian Federation.

The VimpelCom Group includes companies operating in Russia, Kazakhstan, Ukraine, Uzbekistan, Tajikistan, Georgia and Armenia.  The VimpelCom Group's GSM and 3G licence portfolio covers a territory with a population of about 250 million.  This includes the entire territories of Russia, Kazakhstan, Ukraine, Uzbekistan, Tajikistan, Georgia and Armenia.

Verizon Wireless has purchased the operating assets of Ramcell in Kentucky and Oregon, which will increase Verizon Wireless' presence in southeast Kentucky and expand the company's network footprint in western Oregon.  Financial terms were not disclosed.

The purchase includes Ramcell's spectrum licences, 51 cell sites and related operations in the two states.  The acquired licences cover a population of 574,000 people: 300,000 in the Clay and Madison, Kentucky markets and 274,000 in the Coos, Oregon market.

Verizon Wireless will convert Ramcell's TDMA network in Kentucky to CDMA technology to become part of Verizon Wireless' nationwide network, adding capacity and EV-DO Rev. A technology for high-speed data capabilities.  The company plans to complete the network conversion during the first half of 2008 and will notify customers about their service transition prior to the upgrade.

In Oregon, Verizon Wireless will enhance the existing CDMA network with EV-DO Rev. A technology, which offers broadband data speeds for accessing the Internet and e-mail, and downloading music, games and video.  The enhanced service is expected to launch by the middle of 2008.

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