By Ahmed Tabaqchali, CIO of Asia Frontier Capital (AFC) Iraq Fund.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Average daily turnover in November continued to improve, increasing 24% on the back of October’s 24% month-on-month growth. However, the recovery is coming from an incredibly low base and still shows the average daily turnover in-line with the dismal levels of September, which were among the lowest for some time (chart below).

With the gradual recovery in turnover, the market, as measured by the RSISUSD Index, moderated its month-on-month declines, down -1.7% for the month- continuing to test the major bottom of May 2016.

However, the end the Arbaeen, summer, and the government formation are yet to mark the end of the period of, probably, the lowest daily trading volumes on the Iraq Stock Exchange (ISX) since it first witnessed an expansion in volumes in 2010. The anomaly and un-sustainability of these low levels was discussed last month, and logic continues to argue for a reversion to the mean.

(Source: Iraq Stock Exchange, Rabee Securities, Asia Frontier Capital)

It was also argued last month that an uptick in M2 (broad money and a proxy for economic activity) could imply that liquidity, brought on by a two-year recovery in government finances, has finally begun to filter down into the economy – which should accelerate as the new government begins to act on its spending programme.

A nascent recovery in telecoms adds support to this line of reasoning. The two major mobile operators out of three national operators, reported Q3/2018 earnings that display the markers of recovery in earnings, margins and profits. Of the two, AsiaCell (TASC) has been listed since 2013 and as such its reported earnings span the period 2012-2018, and thus reflects the operating environment before, during and just after the ISIS conflict.

(Sources: Rabee Securities, ISX, Company reports, Asia Frontier Capital)

TASC’s earning’s profile marked by rapidly increasing revenues – driven by the country’s adoption of mobile phones – peaked in 2013. The turn for the worst started in late 2013 with the increasing violence before the May 2014 elections, which accelerated by mid-2014 with the ISIS invasion and the loss of over a third of the country, and with that a significant loss in TASC’s subscriber base.

The roll out of 3G in early 2015 brought its own set of problems. The amortization of the fees of $307 million (on top of fees of $1,250 million in 2007 for a 15-year licence) to access the 3G spectrum increased costs meaningfully. While, revenues took a hit as free IP voice telephony soon replaced most expensive regular telephony-especially for international calls, while data fees could not fully replace these lost voice revenues. This was compounded by increased competition among the three mobile operators as they sought to replace both lost consumers and voice revenues through competitive price offerings to lure consumers from each other.

Capping the woes of mobile operators was the severe economic decline brought about by the ISIS conflict and the collapse oil prices as non-oil GDP declined by -3.9%, -9.6% and -8.1% for 2014, 2015 and 2016, respectively.  Finally, the resultant weaknesses in both consumer and business demand was made much worse with the introduction of 20% VAT on phone cards in the summer of 2016.

For TASC, the revenue decline, while cost increases crushed its profits (as the chart above shows), however this decline in profits was moderated by very strict cost controls and decreasing capital expenditures reflecting an earlier heavy investment in infrastructure.

The bottoming in revenues over the last few years came to end in late 2017 with the liberation of Mosul and the gradual return of customers which contributed to the recovery in profitability. The company signalled its confidence in its future outlook with a distribution of a 12% dividend on the back of last year’s 14% dividend – however, in absolute terms the dividend is about one third higher than that of last year. The grandfathering of the transition to 3G, the amortization of the licence and the effects of the VAT introduction, all coupled with the return of customers as well as the expected growth in data usage should lead to a healthy period of resumed earnings growth.

The next few quarters should see a similar recovery for the battered banking sector, with probably the first to recover being the quality of loans. A return of liquidity and an economic pick-up should be followed by a recovery in the quality of bad loans and the reversal of NPL’s (non-preforming loans) with past provisions becoming earnings, thus providing the first boost to earnings recovery. This should be followed by growth in loans and deposits, as should growth in trade finance revenue, and therefore similarly to the case of telecom should lead to a resumption of a period of earnings growth, and with-it better stock price performance. For more details on the banks see “Of Banks and Budget Surpluses”.

Recovery, in frontier markets, is a mirror image of Mark’s Twain’s phrase on going broke, in that recovery happens gradually and then suddenly. If similar experiences in other frontier markets of declining prices while fundamentals point to a start of a gradual recovery, then the trend of the last few months could be followed by a sharp reversal to the upside.

Please click here to download Ahmed Tabaqchali’s full report in pdf format.

Mr Tabaqchali (@AMTabaqchali) is the CIO of the AFC Iraq Fund, and is an experienced capital markets professional with over 25 years’ experience in US and MENA markets. He is a non-resident Fellow at the Institute of Regional and International Studies (IRIS) at the American University of Iraq-Sulaimani (AUIS), and an Adjunct Assistant Professor at AUIS. He is a board member of the Credit Bank of Iraq.

His comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any fund or security or to adopt any investment strategy. It does not constitute legal or tax or investment advice. The information provided in this material is compiled from sources that are believed to be reliable, but no guarantee is made of its correctness, is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding Iraq, the region, market or investment.

IBBC welcomed 260+ delegates to Dubai to discuss ‘Iraq – Reconstruction & Rebuilding, how to deliver Vision’ with expert Industry, Government and International Organisations on 25th November

Iraq Britain Business Council held its annual Autumn Conference in Dubai yesterday on the 25th November at the Address Dubai Marina in Dubai.

The event hosted many speakers from the major companies operating in Iraq including IOCs, Logistics, Finance and Legal and Infrastructure, as well as Government Officials from the UK, UAE, Iraq, The World Bank and IMF to discuss the key issues facing Iraq’s economy today. IBBC welcomed over 260 delegates at the event for its largest ever attendance.

Under the Chairmanship of Vikas Handa, IBBC Representative in the UAE, Baroness Nicholson of Winterbourne, President of IBBC and The Prime Minister’s Trade Envoy to Iraq opened the conference alongside H.E. Abdulla Ahmed Al Saleh, Undersecretary of the UAE Ministry of Economy for Foreign Trade & Industry Professor Sabah Mushatat, Prime Minister’s Advisor for Reconstruction and Investment. H.E. Bengan Rikani, Iraqi Minister for Housing, Reconstruction & Public Municipalities, Government of the Republic of Iraq. Michael Townshend, Regional President BP Middle East and Jon Wilks CMG, Her Majesty’s Ambassador to Iraq.

HE Abdulla Ahmed Al Saleh

IBBC was honoured to have HE Abdulla alSaleh give a keynote speech at the IBBC Conference in Dubai for the third year running, His Excellency reaffirmed the UAE’s commitment to building a diverse and prosperous Iraq as per the IBBC’s mission statement. Professor Mushatat delivered a message from the Prime Minister of Iraq H.E. Adil Abdul-Mahdi delivering the PMs support for the development of the Private Sector and Foreign Enterprise in Iraq and complimenting IBBC as a trusted partner to achieve these goals.

H.E. Bengan Rikani spoke of the challenges ahead to meet the population growth of Iraq, the continuing efforts to rebuild liberated areas and the infrastructure projects underway. Ambassador Jon Wilks highlighted the importance of Iraq to the British economy, where trade has increased by 10% in the last year alone and stressed the commitment of PM Theresa May, Liam Fox MP Secretary of State for International Trade and DFID to facilitating Trade between the UK & Iraq.

“Now is the time to look again at the Iraq Market”
Her Majesty’s Ambassador Jon Wilks CMG

Michael Townshend reminded the audience that there was more Oil available globally than humanity could consume and that the Rumaila’s oilfield operated by BP in Iraq was not only one of the largest but also one of the most economic fields in the globe, providing Iraq with the lion share of its incomes.

Michael Townshend, BP

This year’s Agenda focused on the key issues of how Iraq can rebuild its towns and cities and develop its economy and evolving Infrastructure and Utilities with an emphasis on expanding Oil & Gas production, improving the Regulatory Framework and Financial systems and exploring the role of Logistics in moving people and materials into and around the country.

Conference Sessions & Speakers:

Logistics – Imports/Exports, People & Goods

Beverley Simpson, Director – Iraq, Department of International Trade; Rolls-Royce; SKA International Group; Basrah Gateway Terminal; G4S

Regulatory & Financial Framework – Encouraging International Investment

Management Partners; Dr Sabah Mushatat, Investment & Reconstruction Advisor to the Prime Minister of Iraq; National Bank of Iraq; IMF; AFC Iraq Fund; Eversheds-Sutherland

Energy – Increasing Production

Shell; Chevron; GE

Infrastructure – Rebuilding & Utilities Supply

IFC; Wood; EAMES; Siemens; Prof. Frank Gunter, Lehigh University

Ms Duha Mohammed, Capital Bank of Iraq

The conference also featured the highly successful roundtable discussions, where delegates engaged in dynamic and concentrated debates on the country issues which matter most. Delegates also enjoyed a pre-conference reception on 24th November at the Address Dubai Marina, as well as many networking opportunities throughout the event.

IBBC would like to thank the efforts of its sponsors Rolls Royce, Serco, SKA International Group, Siemens, GE, Basra Gateway Terminal and Khudairi Group.

IBBC also held a Tech Forum on 25th November under the Chairmanship of IBBC Marketing Consultant Ashley Goodall. The forum ran in parallel to the conference at the same venue. Some of the most important innovators of Tech in Iraq spoke on Fintech, the Consumer Economy, E-Government and the Start-Up Economy. Speakers included representatives from EY Iraq, Avaya, Citi Bank, Restrata Group, Microsoft, Khudairi Group, VentureSouq, Careem and the International Development Bank.

IBBC is particularly grateful to Ms Suha Mohammed, DG for payments at the Iraqi Central Bank, and to Mr Hiwa Afandi, DG of the Information Technology Department of the Kurdistan Regional Government for participating in this event.

Tech companies are already disrupting the heavily state dominated Iraqi economy and are the bearers of hope for tangible change in a country that has an extremely young and tech savvy population and has an urgent need to create hundred of thousands new jobs every year.

For any enquires please email london@webuildiraq.org

(Source: IBBC)

IBBC Tech Conference

Sunday 25 November

The Address, Dubai Marina

The Iraq Britain Business Council (IBBC) is bringing together the leading companies involved in Tech in Iraq to discuss the various strands of Tech and the evident possibilities for investment and engagement.

Interest in Tech in Iraq is rising rapidly, with a growing number of start-up hubs and University Entrepreneur Platforms, and especially within financial services as payments and transactions are increasingly automated.

IBBC wants to encourage development of the Tech sector in Iraq as a means to modernise the economy, provide new services for Business, Government and Consumer sectors, to support Education, Health, Finance and Energy sectors, and encourage jobs and activity for young people.

The Tech Conference will focus on three key areas of business opportunity:

  • The Start-up Economy
  • E-Government & Citizen
  • FinTech

Lead participants include Khudairi Group, Restrata Group, EY, Citi, Avaya, KRG Information Technology Department, Microsoft and SAP with more to be confirmed soon.

Register Here

Ashley Goodall of IBBC says:

“Tech industry is capable of rapid development, not only among young people, but also through investors and companies. We have witnessed London’s rise to be Europe’s lead tech destination in just 8 years and IBBC expect the opportunities in Iraq to take off similarly, as the country modernises and evolves educational and job opportunities for young people.”

IBBC is calling for more people and companies to invest into Iraq’ start-ups and to establish their businesses in the country. Attend our conference, free of charge, to hear about the unique opportunities on offer and the exciting new developments in the Tech Sector in Iraq.

The Tech Conference takes place in the Address Hotel, Dubai on Sunday 25th November from 2pm.

For more information please contact IBBC here –

https://www.iraqbritainbusinesscouncil.org/tech-conference

Media contact: Ashley.goodall@webuildiraq.org , London@webuildiraq.org

(Source: IBBC)

By John Lee.

Asiacell Iraq has benefitted from improvements in the security and economic situation in the country, according to its parent, the Qatari company Ooredoo.

In its results for the first nine months of 2018, the company said:

With more areas liberated and network restoration underway, Asiacell reported a 3% increase in Revenue to QAR 3.5 billion at 9M 2018, compared to the same period last year.

“EBITDA was up 8% to QAR 1.6 billion, growing at a faster rate than revenue and reflecting good efficiency management.

Customer base increased 6% to 13.3 million customers for the 9M 2018 period, and Asiacell received the prestigious CARE award for its excellence in customer care service.”

(Source: Ooredoo)

(Picture: Faruk Mustafa Rasool, Chairman of Asiacell)

Comtech Telecommunications Corp. (Nasdaq: CMTL) announced on Monday that during its first quarter of fiscal 2019, its Orlando, Florida-based subsidiary, Comtech Systems, Inc., which is part of Comtech’s Government Solutions segment, has received a $9.1 million sole-sourced contract from The Program Executive Office (PEO) Command, Control, Communications, Computers and Intelligence (C4I), International C4I Integration Program Office (PMW 740), to supply equipment and services in support of an existing C4I Surveillance and Reconnaissance Maritime Surveillance System owned by the Iraqi Navy.

Comtech will be supplying thermal imaging radar in conjunction with Comtech’s advanced digital troposcatter communications systems and backhaul microwave terminals. The communications network will provide radar and sensor data to an existing Command and Control facility.

In commenting on this important award, Fred Kornberg, President and Chief Executive Officer of Comtech Telecommunications Corp., stated:

“I am excited to be able to announce this important contract with a new foreign government end customer. While the sales cycles for opportunities of this type are long, this win is further evidence that demand for troposcatter equipment around the world is growing. We look forward to working with the U.S. FMS and Iraqi Navy on this and future opportunities.”

Comtech Systems, Inc. (www.comtechsystems.com) specializes in system design, integration, supply and commissioning of turnkey communication systems including over-the-horizon microwave, line-of-sight microwave and satellite.

Comtech Telecommunications Corp. designs, develops, produces and markets innovative products, systems and services for advanced communications solutions. The Company sells products to a diverse customer base in the global commercial and government communications markets.

Certain information in this press release contains statements that are forward-looking in nature and involve certain significant risks and uncertainties. Actual results could differ materially from such forward-looking information. The Company’s Securities and Exchange Commission filings identify many such risks and uncertainties. Any forward-looking information in this press release is qualified in its entirety by the risks and uncertainties described in such Securities and Exchange Commission filings.

(Source: Comtech)

In an effort to make quality secondary education more accessible in Iraq, Ericsson has partnered with Zain Iraq to bring its ‘Connect to Learn’ global education initiative to the country, with its initial deployment set for a school in Baghdad.

The initiative aims to scale up quality secondary education for students and teachers by providing ICT infrastructure with mobile broadband, open source, and cloud-hosted learning solutions to facilitate connected learning in underserved schools.

Ali Al Zahid, CEO, Zain Iraq, says:

Education is one of the most valuable investments we can make in society, and in our future. It is a universal human right – and in the digital era, where ICT has the ability to reach every corner of the globe, there is no excuse for quality secondary education to be inaccessible.

“By partnering with Ericsson to bring ‘Connect to Learn’ to schools in Iraq, we are uplifting our communities and empowering them to reach their full potential. We look forward to introducing this initiative in Baghdad and watching it unfold as we move forward.

With the modern technology and solutions offered through ‘Connect to Learn’, ICT solutions become a cost-effective method for rural and limited-resource schools as a means of delivering quality education for students and teachers alike.

Cloud technology enables support and maintenances tasks to be handled externally and remotely, which simplifies the user experience and enables teachers to focus on education. The system is also designed to be easily used and understood by teachers with limited IT competence, inspiring confidence and capability in them as educators.

Rafiah Ibrahim, Head of Ericsson Middle East and Africa, Ericsson says:

When a girl receives quality education, she will earn a decent living, raise a healthy, educated family, and improve the quality of life for herself, her family, and her community.  The ‘Connect to learn’ initiative aims to ensure that girls have access to quality education, regardless of their location or other limitations.  

“We look forward to continue working with Zain Iraq to leverage our technology and the expertise of our employees to make a positive impact in Iraq.

 The ‘Connect to Learn’ initiative was launched in 2010 and is currently deployed in 25 countries, benefitting more than 120,000 students and engaging 16 mobile operators.

(Source: Ericsson)

A new low-cost satellite broadband service will be launched across Iraq and Afghanistan as Belgium’s SatADSL, a provider of professional VSAT services via satellite, and UK-based Talia agreed to expand their long-term partnership.

The two companies’ current agreement lets SatADSL link directly to Talia’s teleport to provide services across the whole of Africa, with Talia’s equipment providing high performance and low-cost per megabit. Under the new deal, SatADSL will also be able to access Talia’s new platform in Jordan Media City, enabling it to offer Ka-band services across Iraq and Afghanistan.

“We are taking our relationship with Talia to the next level by using its facilities to offer our innovative services across Iraq and Afghanistan,” said Caroline De Vos, Co-founder and Chief Operations Officer at SatADSL. “The use of Ka-band High Throughput Satellite capacity, combined with Talia’s equipment means the services we provide can be quickly and easily installed by users and offered at an extremely competitive price, taking a significant step towards bridging the digital divide.”

By connecting its Cloud-based Service Delivery Platform (C-SDP) to Talia’s hub, SatADSL will be able to offer the full range of services available on its platform in Iraq and Afghanistan, including vouchers, VNOFlex, Wi-Fi Hotspots, etc. The C-SDP is a Platform-as-a-Service (PaaS) solution which enables operators to deliver a full range of satellite-based connectivity services without investing in physical infrastructure. SatADSL expects to have worldwide coverage by the end of the year, further expanding the reach of its C-SDP.

To enable connectivity, Talia uses capacity on the Arabsat 5C Ka-band satellite, located at 20o East. Talia is offering its services based on the Newtec Dialog® multiservice platform which features small VSAT antennas (75cm) on the remote site to create a new lower price point for Internet access and innovative setup guides for self-installation via a smartphone app. A variety of Newtec’s broadband satellite modems have also been deployed, supporting different bandwidth allocations to ensure optimal bandwidth usage. This includes Newtec’s dynamic Mx-DMA technology to achieve the efficiency of SCPC with the dynamic bandwidth allocation of MF-TDMA.

“We see this next chapter with SatADSL as building upon what has so far been a hugely successful partnership in Africa, enabling many developing countries to have access to affordable fast satellite Internet,” said Jack Buechler, VP Business Development at Talia. “Just as in Africa, the services which SatADSL will provide in Afghanistan and Iraq, using our infrastructure will help bridge the digital and economical divide and transform societies for the better.”

(Source: Talia)

Zain Iraq has selected Ericsson (NASDAQ: ERIC) to modernize a number of its legacy sites with Ericsson Radio System in a contract signed recently that serves to strengthen the partnership of the two companies.

Under the terms of the deal, Ericsson will reinforce its role as a trusted business partner by providing higher capacity and improving network performance.

In an effort to accelerate digitalization in the region, Zain Iraq and Ericsson are enabling rapid deployment of innovative services in the Internet of Things (IoT) in the coming years. The partnership will also ensure seamless 4G and 5G evolution across Zain’s networks

Ali Al Zahid, Zain Iraq Chief Executive Officer, says:

“Zain is committed to bringing the latest technology and cutting-edge services to its customers.  Upgrading current networks with the latest technology to cater for increasing traffic volumes and enhanced customer experience is a key priority. It also reflects our commitment to providing the mobile community in Iraq with the highest quality of service available.”

In addition to consumer services, security and energy companies are some of several industries starting their own digital transformations. Ericsson Radio System offers far more than the benefit of capacity building and performance, it also provides high bandwidth for content-rich applications.

Rafiah Ibrahim, Head of Ericsson Market Area Middle East and Africa, says:

“I am glad that we continue a good cooperation with our long-term partner Zain.  This new contract will accelerate Zain’s digital journey and build its digital infrastructure with the introduction of new services and virtual functions.  This will enable Zain to deliver the best possible user experience in two major cities in Iraq and meet the data demands of tomorrow in a timely manner.”

Zain Iraq and Ericsson are pioneering the use of next-generation networks with the anticipated increase in data traffic as IoT promises new capabilities and use cases.

Network modernization and adoption of new technologies are essential to meeting users’ demand for capacity and coverage. Modernizing the network infrastructure of Zain Iraq’s network services will not only improve end-user experience through increased capacity, but also accommodate future needs.

(Source: Ericsson)

By John Lee.

Zain Iraq performed “exceptionally well” in H1 2018 when compared to H1 2017 with revenues reaching USD 558 million, a 7% increase Y-o-Y and EBITDA reached USD 194 million, up 8% reflecting an EBITDA margin of 35%.

According to a statement from the company, the operation reported a net profit of USD 18 million, up 66% on the USD 11 million profit recorded for H1 2017.

The expansion of 3.9G services across the country and restoration of sites in the West and North of the country, combined with numerous customer acquisition initiatives, especially in core regions, resulted in an impressive addition of 1.9 million customers (15% increase) to reach 14.7 million.

Also contributing to the operation’s financial revival was the significant growth of data revenues, robust growth in the Enterprise (B2B) segment and the revamping of its call centers significantly improving customer service.

(Source: Zain)

(Pictured: Bader Al-Kharafi, Vice-Chairman and Group CEO)