France Telecom Trapped in Kurdistan's Korek Scam

Benaw Izzat | Exclusive to iKurd.net

ERBIL,— France Telecom is a listed company partly owned by French public funds therefore the company has the obligation to release a certain number of documents regarding their accounts and partnerships in foreign countries.

Just remember that in March 14th 2011 France Telecom announced officially:

”France Telecom-Orange will pay $245 million (175 million euros) for a 20 percent indirect stake in Korek Telecom, and will extend a $185 million (132 million euros) 4-year shareholder loan to Korek Telecom. France Telecom-Orange estimates that the implied EVand/EBITDA multiple attributable to Korek Telecom’s Kurdistan operations is below 5 times”

Yesterday , France Telecom revealed the true figures and they are just catastrophic. Korek turn over is only EUR 269 million but that is not so much a surprise as Korek main activity is in the northern part of the Kurdistan Regional Government KRG. But the net result shows a loss of EUR57 million.

Forget the commitment of doing an IPO on Baghdad Stock Exchange the Iraqis are not that stupid, neither the Kurds. We all know how Korek was created, Michael Rubin opened everybody ‘s eyes on the company already in March 5th 2010:

“For Korek to win its license, it spent something less than one billion dollar, actually 600 Million that money came out of KRG’s budget for the private use of Massoud Barzani’s nephew, not Nechirvan Barzani but a different one. And this is absolutely wrong. Nowadays Korek is still a poor company because it is a family company, it is not a professional company”

France Telecom could not ignore it, so many competitors looked at Korek and turn down the company without making any offer. Ariafon scandal by which Andreas Koutroukides has been completely frustrated was also publically known.

Going through France Telecom accounts help to understand the scenario. Curiously they did not buy Sheick Serwan Mustafa stake directly. They created a company a joint venture with Agility and it is this company that has a stake in Korek.

Agility was indicted Nov. 9, 2009 on charges of fraudulently over billing the military on unrelated contracts that paid $8.5 billion for distributing food to American soldiers. It is their private equity arm Alcazar Capital which is in fact the real partner of France Telecom.

Anyway the joint venture is looking very much like a shadow company, no name mention in France Telecom book, no nationality, no nothing but “the joint venture”.

Of course this attempt to hide the name and the nationality of the joint venture is triggering an alarm bell more than if the name had been given. Iraq and the KRG are among the most corrupt places in the world.

If you have to look for kickbacks and reverse kickback (to the buyers profit on the back of the company itself) you would into this unlikely mysterious joint venture.

Some people must have thought in March 2010 that they would make easy money and nobody would found anything. But for doing so Korek had to make profit, Korek had to deliver a minimum of the dreams that they sold to France Telecom at the time.

One can also better understand why Korek CEO’s Gahda Gebara recently asked Baghdad to deliver a 3G licence almost for free. In a pathetic appeal to save what remains of Korek she tried to explain that the price of the 3G licence would hurt the Iraqis ,” the more money you pay, it’s the customer that will pay”.

Could the 3 G licence save Korek ? It is very unlikely, just like in Ariafon/Nawroztel case the only thing that would save the Kurdish Telecom sector would be for the Barzani ‘s private holdings to pay back a compensation to those who have been frustrated and trapped in their scams.

Now we have Ariafon/Koutroukides scandal and Korek scam in the newspapers front pages as two warnings of what can happen to people who invest in the KRG.

Mrs. Benaw Izzat – a special reporter and senior writer for iKurd.net.

The opinions are those of the writer and do not necessarily represent the views of iKurd.net or its editors.