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By John Lee.

Mobile phone service Asiacell has reported a sharp drop in revenue, when expressed in Qatari riyals, as a result of the devaluation of the Iraqi dinar.

In its results for the three-month period ended 31 March 2021, parent company Ooredoo said:

"The Iraqi economy was impacted by weakening purchasing power following the 17% devaluation of the Iraqi Dinar and the effect of the COVID-19 pandemic.

"Asiacell reported revenue of QAR 852 million during the first quarter of 2021 compared to QAR 1,085 million for same period in the previous year.

"Consequently, EBITDA declined 20% to QAR 380 million in Q1 2021 compared to the same period in the previous year. The company's cost optimisation initiatives contributed to a healthy EBITDA margin of 45% in Q1 2021.

"Asiacell maintained its customer base of 14.6 million (Q1 2020: 14.5 million), supported the launch of 4G and new partnerships with OSN and LaLiga, enabling the company to offer bundled services and increase data usage."

(Source: Ooredoo)

The Foreign Minister Receives Secretary General of Gulf Cooperation Council of Arab States to Discuss Gulf Investment in Iraq

Iraq's Foreign Minister Mr. Fuad Hussein has this week discussed investments in Iraq with the Secretary-General of the Gulf Cooperation Council, Dr. Nayef Al-Hajraf.

During the meeting, issues of concern to the Gulf Cooperation Council and Iraq were also discussed, as the Minister welcomed the results of the Al-Ula summit and the return of normal relations between the Kingdom of Saudi Arabia and Qatar, indicating that the natural relations between countries in the region effects positively the Gulf countries and Iraq.

The two sides also discussed economic issues with the Gulf states, and the issue of electrical interconnection and the war against terrorism in addition to preparations for holding early elections in Iraq, and cooperation and coordination in building good relations with regional countries.

On his part, the Secretary General of the Gulf Cooperation Council, Dr. Nayef Al-Hajraf, stated that the Cooperation Council is keen to strengthen relations with Iraq, pointing out that the electrical interconnection program is one of the most important projects that will benefit all.

Mr. Al-Hajraf stressed that the stability of Iraq has positive outcome for the security of the region, and that the Gulf states support the stability of Iraq in its war against terrorism and drying up its sources, indicating that the Iraqi government is capable of extending the law.

(Source: MOFA)

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.

Market Review: "Of Assassinations and Corporate Activities"

A quiet start to the new year would have been welcome after the drama of the currency devaluation in December. However, this January, the stage was set for a potential conflict between the US and Iran fought across Iraq.

In mid-December, Iran's supreme leader renewed his revenge vow two weeks ahead the first anniversary, on January 3^rd, of the US strike in Baghdad that killed Iran's top general. At the same time, the prior US administration was escalating its aggressive stance against Iran before its term expired on January 20^th.

The US increased its military presence in the Gulf in the weeks before the anniversary which further exacerbated tensions between the two antagonists. This increased presence was extremely concerning in light of reports in November that the prior US President considered options for attacking Iran's nuclear facilities before leaving office.

While thankfully none of these fears materialised, on January 21^st a suicide bombing took place in central Baghdad for the first time in years, in which the Islamic State Group (ISIS) claimed responsibility. The combination of fears and the bombing had a chilling effect on economic activities, including trading on the Iraq Stock Exchange (ISX) where average daily turnover (excluding block transactions) declined by 26% month on month (chart below).

Foreign buying, a solid trend of the last few months of 2020, almost disappeared, while foreign selling was very low in both relative and absolute terms (second chart below). Not surprisingly, the market, as measured by the Rabee Securities RSISX USD Index, ended the month down 9.3%.

(Source: Iraq Stock Exchange (ISX), Asia Frontier Capital (AFC), data as of January 31^st)

Away from the concerns of the US-Iran conflict, the equity market digested several positive corporate activities that affected listed companies in the banking, consumer, and telecom sectors.

The first corporate development took place in the banking sector with the takeover by the National Bank of Iraq (BNOI) of the Iraqi branch network of Lebanon's Bank Audi,  as part of a larger acquisition by BNOI's parent Capital Bank of Jordan (owning 61.9% of BNOI) of Bank Audi's Jordanian branch network. The combined takeover of the assets and the assumptions of the liabilities of one of Lebanon's top banking institutions in Iraq and Jordan was made possible by Lebanon's financial crisis which forced its banks to halt their international expansion, divest their prized international assets, and refocus on their domestic market. Also, the takeover fits in with Capital Bank of Jordan's expansion strategy in its domestic market, and in its much larger neighbouring market of Iraq, as it seeks to grow both its asset base as well as its revenue streams.

For BNOI, the acquisition increases its assets by IQD 275.0 bln (USD 188.4 mln), or by 32%, to IQD 1,137.6 bln (USD 779.2 mln), and the acquisition takes it into the league of the Iraq Stock Exchange (ISX) largest banks by assets, such as the Bank of Baghdad (BBOB) at IQD 1,248.3 bln (USD 855.0 mln) and Mansour Bank (BMNS) at IQD 1,200.6 bln (USD 822.3 mln). All data are as of end of the third quarter 2020.

While BNOI hasn't reported audited full year 2020 numbers, its unaudited fourth quarter numbers show for 2020 year-over-year pre-tax earnings growth of 116.3%, loan book growth of 88.0%, and deposit growth of 44.9%, for a loan/deposit ratio of 64.5% versus 54.9% in 2019. The December market review "Private Sector Deposit & Loan Growth Continues" looked at the growth of private sector loans and deposits generally, and specifically for selected ISX banking stocks. The piece highlighted with data and charts BNOI's growth in the key metrics of loan book and deposit growth both in absolute terms and relative to its peers on the ISX. Upcoming financial data in 2021 should incorporate the figures from the Iraqi branches of Bank Audi and would provide data for the combined entity's potential future growth rate, while the increased asset size of the combined entity should enhance its competitive market position.

This acquisition by BNOI of Bank Audi's Iraqi branch network is a first in the Iraqi banking sector and is likely to accelerate the sector's development.  It is also the first expansion of the sector following the initial foreign bank's acquisition of major shareholdings in local banks post the March 2003 US invasion of Iraq. Then, the governing Coalition Provisional Authority (CPA) brought the country's legal framework for banking in-line with international standards, and lifted restrictions on foreign participation in the banking industry. A number of regional and international banks bought majority stakes in a number of Iraqi banks to take advantage of the potential growth as banking adoption takes hold in Iraq's cash dominant economy.

Most of these banks, increased their ownership in the selected Iraqi banks and participated in the significant expansion of these banks' capital base between 2011 and 2013. At the time, the Central Bank of Iraq (CBI), mandated all Iraqi banks to increase their capital to at least IQD 100 bln by mid-2011, then to IQD 150 bln by mid-2012, and finally to IQD 250 bln by mid-2013. As of the end of 2019: Al Ahli Bank of Bahrain owned 75.0% of the Commercial Bank of Iraq (BCOI), Burgan Bank of Kuwait owned 51.7% of the Bank of Baghdad (BBOB), Capital Bank of Jordan owned 61.9% of the National Bank of Iraq (BNOI), the National Bank of Kuwait owned 91.0% of the Credit Bank of Iraq (BROI), and Qatar National Bank of Qatar owned 54.2% of Mansour Bank (BMNS).

The second corporate development was in the consumer sector with the acquisition by Pepsi bottler Baghdad Soft Drinks (IBSD) of privately held Al-Zaki Group - another bottler, but of juices and water, and about to extend its offerings to bottled milk. This acquisition fits in with IBSD's strategy of both expanding its product line and deepening its relations with PepsiCo; and follows up on its prior takeover in 2016 of Ynabee' Al Zawraa Company, a bottler of Aquafina, PepsiCo's water brand. The 2016 acquisition increased IBSD's product line and addressable market, and the 2021 acquisition should expand both further. Moreover, while Al-Zaki Group is not a PepsiCo franchisee, it is expected that a successful penetration of the juice market in Iraq by IBSD would enable the group to obtain from PepsiCo the franchise for its Tropicana juice brand.

While IBSD hasn't reported audited full year 2020 numbers, its unaudited fourth quarter numbers show full year revenue growth of 12.6% year-over-year, while pre-tax income was up 20.9% year-over-year.

The final corporate development was in the telecom sector with the introduction of 4G-LTE (fourth generation long-term evolution) by the telecom operators. While the offering is in the very early stages, it promises to bring significant advantages to both internet users and to the ISX's listed mobile telecom operators such as AsiaCell (TASC) and Zain-Iraq (TZNI). Growth in mobile internet usage expanded considerably after 3G was launched by the mobile operators in early 2015 - which currently accounts for a meaningful share of all internet access in the country.

Industry data as of January 2020 shows that there were 29.8 mln internet users, or about 75% of the population, across all devices. Moreover, the number of internet users increased by 55% from 2019 to 2020. While not all of these are mobile internet users, the same data shows that active social media users were 21.0 mln, or about 53% of the population; all of these active social media users accessed the internet via their mobiles. It should be noted that while the phone is the main device for connecting to the internet for most of Iraq's internet users, not all of these connections are through a 3G subscription - a large portion of the population uses their phone to access the  internet via public Wi-Fi networks which might be either fibre broadband or 3G mobile broadband.

This is a massive market with significant growth opportunities as Iraq's mobile internet usage catches up with its regional peers. The introduction of 4G-LTE presents a significant opportunity for the mobile telecom operators to enhance their competitive offerings. Moreover, 4G-LTE's materially faster download-speeds and broader bandwidth versus 3G will allow them to offer meaningfully better service and charge higher prices.

These positive corporate activities in the banking, consumer, and telecom sectors underscore the significant earnings growth opportunities for focused and well-run companies in Iraq's under-developed, yet large, economy. Moreover, these recent developments also underscore the relative attractiveness of the stocks in these sectors, within the context of the Iraqi equity market that is at the tail end of a brutal six-year bear market, and as such a re-rating of the Iraqi equity market along with other frontier markets is likely to happen sooner than generally expected.

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.

Iraqi Civil Aviation Authority awards first international ground services operating license to Menzies' MASIL Joint Venture

Menzies Aviation announced on Thursday that the Iraqi Civil Aviation Authority (ICAA) has awarded the exclusive contract for the delivery of a full suite of ground handling, cargo and fuelling services at Baghdad International Airport to Menzies' joint venture with Iraqi Airways, trading as MASIL.

MASIL is listed as The United Iraqi Company for Airports and Ground Handling Services Limited and is a joint venture between Iraqi Airways, Air BP Limited, Menzies Aviation and Al Burhan Group.

This is the first license of its kind to be awarded by the ICAA to a foreign aviation services company.

The award comes as Iraq looks to global industry players to help grow its aviation industry, a key driver for the economy, with plans to upgrade key infrastructure and services at Iraq's largest airport, Baghdad International Airport. In addition to being the hub airport for Iraqi Airways and Fly Baghdad, it currently handles all aircraft movements for airlines such as Qatar Airways, Emirates and Turkish Airlines.

Menzies' MASIL Joint Venture commenced operations on 21st January, and the joint venture partners intend to draw on their collective global industry experience and world class standards to further improve the customer experience and safety standards at the airport. One of the key aims of the joint venture will be to train and develop Iraqi nationals to assume key positions.

Charles Wyley, EVP Middle East, Asia and Africa at Menzies Aviation, comments:

"We are pleased to have been awarded the exclusive contract at Baghdad International Airport and we look forward to supporting the development of Iraq's world class operating procedures and training schemes.

"Menzies provides passenger, ramp and cargo services at over 200 airports globally and we're excited to share our unparalleled experience to help build knowledge and competence within the workforce in Baghdad."

(Source: Menzies Aviation)

New Zealand's Foreign Affairs Minister, Winston Peters, has announced the closure of the New Zealand Embassy in Baghdad.

Mr Peters said:

"This decision to permanently close the Embassy was not taken lightly and is in no way an indication of any change in the value that New Zealand places on its relationship with Iraq.

"The Embassy was opened in 2015 to support the New Zealand Defence Force military deployment to Iraq and, with the withdrawal of the majority NZDF troops from Taji earlier this year, the primary rationale for the Embassy in Baghdad has been removed.

"New Zealand is proud of the partnership that has developed between the two countries through our contribution to the Coalition to Defeat ISIS, including the training of over 47,000 Iraqi Security Forces through the joint Australia - New Zealand Building Partner Capacity Mission in Taji.

"Although the Embassy is closing, our strong commitment to the global fight against terrorism remains. New Zealand will continue to contribute its other lines of effort against ISIS, including through a small number of military roles in the Coalition and the provision of stabilisation funding to Iraq."

New Zealand currently deploys four NZDF personnel to Coalition Headquarters in Iraq and Kuwait, and five operational support roles based in Qatar. The mandate for these roles has been extended until June 2022.

The Embassy in Baghdad will close at the end of June and New Zealand's formal accreditation to Iraq will transfer to the New Zealand Embassy in Abu Dhabi.

(Source: New Zealand First Party)

By John Lee.

On May 21, the Government of Iraq extended the suspension on scheduled flights to and from Iraq until 8:00 p.m. on May 31.

Qatar Airways is offering a special flight from Baghdad on May 26.  This flight is not organized by the Embassy.

(Source: U.S. Embassy Baghdad)

Advertising Feature

Rabee Securities Iraq Stock Exchange (ISX) market report (week ending: 30th April 2020).

Please click here to download a table of listed companies and their associated ticker codes.

The RSISX index ended the week at IQD503 (-12.6%) / $522 (-12.6%) (weekly change) (-23.7% and -25.5% YTD change, respectively). The number of week traded shares was 2.3 bn and the weekly trading volume was IQD1.5 bn ($1.2 mn).

Note: ISX will be open three days a week (Sundays, Tuesdays, and Thursdays) next week, like this week. During that period, the lower daily price change limit will be 5% and the upper daily price change limit will be maintained at 10%.

ISX Company Announcements

• Asiacell (TASC) increased its customer base by 5% y/y to 14.8 mn as end of 1Q20 due to the good growth in data users, according to its parent, the Qatari company Ooredoo. The company said "Revenue is higher than last year driven by growth in DATA and VAS revenues; impacted by COVID-19 in March 2020." TASC increased revenues 1% y/y to QAR1,085 mn ($296 mn) in 1Q20. EBITDA increased 0.4% y/y to QAR473 mn ($129 mn) in 1Q20, and EBITDA margin stayed at 44%.  (Ooredoo)
• The ISX will hold its AGM on Jun. 26, 2020 to discuss and approve 2019 annual financial statements, the board of governors' 2019 report on the ISX's activity, and to discuss ISX program for the year 2020.
• Al Taif Islamic Bank for Investment & Finance (BTIB) sent a letter to the CBI on Apr. 28, 2020 stating that due to the unexpected situations in the country and with imposing full curfew, the bank couldn't extend the subscription for additional 60 days to complete the subscription for full shares offered that started on Jan. 19, 2019 to increase their capital from IQD100 bn to IQD150 bn. BTIB will notify when the capital increase procedures are complete.
• Al Nibal Al Arabya for Money Transfer (MTNI) decided to decrease its capital from IQD45 bn to IQD5 bn in its AGM held on Feb. 25, 2020.
• Elaf Islamic Bank (BELF) resumed trading on Apr. 26, 2020 after discussing and approving 2018 annual financial statements in its AGM held on March 10, 2020.
• Erbil Bank for Investment and Finance (BERI) resumed trading on Apr. 26, 2020 after electing 7 original and 7 alternative board members in its GA held on Feb. 22, 2020.

Qatar Airways, Emirates and several other Persian Gulf airlines still fly in Iranian and Iraqi airspace and to cities in both countries since Iran and the United States traded military strikes.

“Iranian airspace is important for all carriers in this region,” said Adil al-Ghaith, Emirates’ senior vice president, commercial operations, Persian Gulf, Middle East and Iran, Reuters reported.

Dubai-based Emirates and sister carrier flyDubai together serve 10 cities in Iran and Iraq, and have continued to use the airspace of both countries for other flights.

Kuwait Airways and Abu Dhabi-based Etihad Airways have also continued using Iranian and Iraqi airspace.

“We will continue to fly to Iran because Iran is an important country to us and it is our neighbor and we want to serve the people of Iran,” Qatar Airways Chief Executive Akbar al-Baker said on the sidelines of a Kuwait air show.

However, some regional carriers have changed their routes. Bahrain’s Gulf Air has redirected European flights away from Iraqi airspace and now flies longer, more fuel consuming routes over Saudi Arabia and Egypt.

“We want to take the safest option even if it costs us a little bit more for a period of time. We can live with that,” Deputy Chief Executive Waleed Abdulhameed al-Alawi said.

The UAE regulator told its carriers — Emirates, Etihad, flydubai and Air Arabia AIRA.DU — this month to “evaluate flight path risks” although it said it was up to the airlines to make the final decision on the routes they chose.

(Source: Tasnim, under Creative Commons licence)

By John Lee.

The Cabinet held its regular weekly meeting in Baghdad on Tuesday under the chairmanship of Prime Minister Adil Abd Al-Mahdi, and:

• reviewed progress in implementing the reforms, initiatives and measures announced by the government to meet the legitimate demands of the protests;
• approved a draft law on the accession of the Republic of Iraq to the 2005 Protocol to the Convention for the Suppression of Unlawful Acts against the Safety of Maritime Navigation of 1988;
• authorised the Minister of Transport to negotiate and sign a draft maritime transport agreement between the Government of Iraq and the Government of the State of Qatar;
• approved a recommendation to the Council of Representatives (Parliament) to expedite the legislation on Iraq’s accession to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention), one of the key instruments in international arbitration.

(Source: Govt of Iraq)

Doha: Signing of the Italy-UNESCO Agreement on children's education in Iraq

The Director General for Development Cooperation of the Ministry of Foreign Affairs and International Cooperation, Giorgio Marrapodi, and the Director of the UNESCO Office in Iraq, Paolo Fontani, signed an agreement today in Doha for the implementation of a joint cooperation project aimed at ensuring access to education for children in Iraq who currently cannot go to school.

The agreement is part of a broader program also funded by the Education Above All Foundation of Qatar. Italy will support the project with one million euros. The aim is to help remove some of the obstacles that limit access to education in Iraq.

The funds will be used by UNESCO to rehabilitate ten schools, conduct education campaigns, and enroll 17,000 boys and girls of the Governorships of Salah al-Din and Baghdad.

Director General Marrapodi commented:

"In the Iraqi context it is even more important than anywhere else to create synergies between the different sources of knowledge and experience: Iraq, Italy, Education Above All and UNESCO will each offer an important contribution to the activities of the project.

"We are confident that this project will be a starting point for a broader and more fruitful trilateral collaboration with Qatar, in Iraq and also in other contexts”.

At the signing ceremony of the agreement, Paolo Fontani, Director of the UNESCO Office in Iraq, said:

“UNESCO is particularly grateful to the Italian Government and to Educate A Child - the global programme of the Education Above All Foundation - for the support provided to the project. Improved access to education for excluded boys and girls is the best possible contribution to their future and to the future of Iraq."

Italy's Ambassador to Qatar, Pasquale Salzano, commented:

"We are pleased that the signing of this agreement takes place in Doha within the framework of the WISE Summit, and that it focuses, in particular, on access to education for children in disadvantaged countries.

"Italy has always been one of the major contributors to UNESCO and the project agreement signed today in Doha strengthens our commitment to promote access to education, alongside Qatar and the Education Above All foundation which is engaged in Iraq in Africa and in the world, providing education to over 10 million children living in crisis areas."

(Source: UNESCO)