Developing Telecoms | North Korea signs up Orascom 3G, invests US$400 million

23 May 2012

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North Korea signs up Orascom 3G, invests US$400 million

Tuesday, 26 February 2008 16:38

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Only a few weeks ago Developing Telecoms made an appeal for anyone who has knowledge of the individual markets we have not yet covered to come forward with any information they might have. Details are now emerging of a contract whereby Middle East mobile player Orascom will be supplying 3G services to North Korea.

North Korea, despite its reputation for being autocratic and backward, does boast an existing GSM network. It is centered around the capital city Pyongyang. In recent years but have been difficult to tell whether the number of mobile subscribers has increased or decreased but it is generally agreed that investment can only benefit the country.

Step forward Orascom, the Egyptian wireless firm, with its plans to put US$400 million into a new mobile system. In addition to a conventional GSM network, it is planned that 3G facilities, hitherto unknown, will also be available for North Korean subscribers.

Length of the contract is intended to be 25 years, with Orascom acting through CHEO Technology, the JV subsidiary in which it has a 75% holding. Orascom's partner will be North Korean Government-controlled Korea Post and Telecommunications Corporation.

The background to Orascom's move into North Korea is slightly complicated by the fact that around ten years ago there was some upsurge in mobile numbers. This in turn appears to have been counter-balanced in the last four years with a decline.

A statement from Orascom is highlighting investment in network infrastructure and also in licence fees up to 2011 not only to deploy a high quality network but also to offer "voice, data and value added services at accessible prices to the Korean people." For Orascom Chairman and CEO Naguib Sawiris, the contract "is in line with our strategy to penetrate countries with high population and low penetration by providing the first mobile telephony services."

One result of the Orascom contract is, naturally, higher wireless penetration. For one analyst, Alex Kuznetsov of Bear Stearns, such penetration will top 20% by 2012 with profitability two years into the new contract.

Challenges will still present themselves, notably in what content the North Korean Government will allow its citizens to import (if any), and whether non-North Koreans will be allowed to use mobile facilties in the country, which at present they are not.

* Orascom is believed to be the largest mobile communications company in the Middle East with 65 million subscribers. It operates networks in Algeria, Egypt, Pakistan, Bangladesh, Tunisia and Zimbabwe and previously had a business in Iraq.

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