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Boston, MA -- (ReleaseWire) -- 02/13/2014 --The Iraqi mobile sector recorded double-digit growth over the 12 months to September 2013. This supports our outlook for continued subscriptions growth during our five-year forecast period ending in 2017, driven by network expansion to underserved areas and relatively strong private consumption. However, we caution that an uptick in sectarian violence in 2013 poses a downside risk to our outlook, as operators are likely to reassess their long-term investment strategies. The allocation of 3G spectrum, expected in H114, may also impact operators' investment strategies, prompting them to focus on building up advanced data networks in wealthier and more densely populated urban areas rather than pursuing subscriptions growth by extending networks to underserved rural areas. 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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Key Data

- The mobile market grew by 10.2% year-on-year (y-o-y) in Q313. We forecast the sector to grow by an average of 6.2% annually between 2013 and 2017.
- After relative stability, Zain Iraq and Asiacell have reported a drop in ARPU in 9M13. 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% at the end of 2012, and we do not expect the situation to improve significantly through to 2017. We forecast the penetration rates to reach 5.1% by the end of our forecast period.

Risk/Reward Ratings

Iraq remains in eighth position in BMI's MENA Telecoms Risk/Reward Ratings (RRRs), with an aggregate telecoms rating of 51.3. We forecast Iraq's economy to expand by 8.6% and 9.4% in real terms in 2013 and 2014 respectively, mainly as a result of increasing oil exports. However, the ongoing political instability and sectarian violence led us to downgrade our forecasts for 2013 and 2014, and continue to pose significant downside risks to the economic outlook.

Key Trends And Developments

In September 2013, Tishkent, a WiMAX operator based in Iraq's semi-autonomous Kurdistan region, selected Ericsson to deploy a Time Division Duplex Long Term Evolution (TDD-LTE) network in northeastern Kurdistan. The deployment will include RBS 6000 base transceiver stations (BTS) and Ericsson's Evolved Packet Core network. The Kurdistan Region is one of the country's most active business hubs and will benefit from the service. It is worth noting that Regional Telecom, a telecoms service provider operating in the Kurdistan region of Iraq, launched commercial LTE services under the Fastlink brand in June 2013.

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