War Could Benefit American Telecoms

NEW YORK -- The telecommunications equipment industry is quietly pinning its hopes on a quick Iraqi war that would be followed by a U.S.-led effort to rebuild the country after the ouster of Saddam Hussein.

Iraq, whose communications networks were heavily damaged in the 1991 Gulf War, is sorely in need of an entirely new, modern telecommunications system for its civilian population.

And if a pro-U.S. government were to emerge in Iraq, telecommunications analysts say U.S. companies like Lucent Technologies and Motorola could gain an edge over competitors from France and China that have won relatively modest contracts in recent years to help Iraq improve its communications network.

An important precedent, these analysts say, came after the Gulf War, when Saudi Arabia awarded Lucent at least $4.5 billion of contracts to overhaul its telephone system.

That deal, among the largest government awards to any equipment manufacturer in the last decade, was widely associated with an effort by allies in the region to favor U.S. companies after the war.

"A new government in Baghdad more favorably disposed to the United States could tilt the geopolitical favor of telecoms' future contracts in the direction of American companies," said Joseph Braude, a senior analyst at Pyramid Research, a company in Cambridge, Massachusetts, that conducts international telecommunications research.

Braude, who is also the author of "The New Iraq," a coming book about rebuilding that country's infrastructure, estimated that Iraq needed to invest at least $1 billion over the next several years to improve its basic fixed-line telephone system.

Iraq has one of the least advanced telecommunications networks in the world. The number of telephone lines per 100 inhabitants has declined to three from 5.6 in 1990.

Iraq is also one of the few remaining nations lacking a commercial wireless network in its capital city.

The establishment of a new wireless system would come after several unsuccessful attempts to build one. The most recent effort was by Huawei Technologies, a Chinese equipment manufacturer, which was awarded a $28 million deal in 2001 by the Iraqi government to construct a mobile network with a capacity of 25,000 users. But Huawei pulled out of the project after complaints that the project might violate United Nations sanctions.

It is Alcatel, the large French communications equipment company that built much of Iraq's telephone system in the 1980s, that may have the most to lose in the event of a government change in Iraq that would favor U.S. companies over European and Asian rivals.

Alcatel recently began work on a $75 million contract to build an international telephone exchange and a microwave telephone system linking Baghdad with the nation's central and southern provinces. Alcatel was also planning to restore numerous existing telephone links in Baghdad and install new exchanges with a capacity of 280,000 lines.

Tim Fiala, a spokesman for Alcatel, said the company was proceeding with both projects, but he declined to elaborate on Alcatel's preparations for possible political changes in the country.

"We would not want to speculate on what will or will not happen in the future in Iraq," Fiala said.

Executives at U.S. companies that are analyzing contract opportunities in Iraq are hesitant to discuss publicly their views of the Iraqi market.

Jennifer Weyrauch, a Motorola spokeswoman, said, "If an opportunity exists under the right circumstances we would take a close look at it." The company operates in 10 countries of the Middle East and North Africa.

"To this end," Weyrauch continued, "we urge the U.S. Congress and administration to prepare to promptly remove existing sanctions that would impede U.S. businesses from participating in the reconstruction and recovery effort."