Telecom contracts Under Suspicion of Graft

The Financial Times says that the Pentagon is investigating the interim Iraqi minister of communications and two officials of the Coalition Provisional Authority concerning charges that they had taken bribes in granting licenses to build and operate mobile telephone networks in Iraq. The Orascom contract is the one under suspicion (Asia Cell and Atheer were awarded the other 2/3s of Iraq in their contracts). Orascom denies wrongdoing.

The Iraq telecom contracts have been handled in a very shady way from the beginning. Batelco, a great little Bahrain telecom company, put $5 mn. into Iraq in May and June and started offering mobile phone service on its own. After a few days, Paul Bremer closed it down, saying telecom companies would have to have licenses. Then it was announced that MCI Worldcom would get the contract. Worldcom is under indictment for fraud and by Federal rules shouldn't have been offered such a contract. Besides, it has no experience in wireless telecom.

Then it was announced that no telecom companies with partial government ownership would be allowed to bid on the contracts. Batelco is 40% government owned, so it would be out of the running. In fact, only the US is crazy enough to have privatized its telephone companies completely, so the rule would have led to US companies winning the contracts. There was an uproar over that. Then the CPA seems to have backed off and let local Middle East companies bid after all, but Batelco still didn't get a contract. Now we have some indication of why.