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MCI's Iraq Offensive

The Bush administration’s decision to award MCI (Nasdaq: MCIT) a small but significant GSM (Global System for Mobile communications) network deal for military use in Iraq has left the wireless market split over the carrier’s credentials for such a project.

The contract is reportedly worth approximately $45 million. According to Joseph Braude, senior Middle East analyst at Pyramid Research and author of The New Iraq, the deal will provide a network of 5,000 cellular lines in Baghdad to U.S. officials, American troops, and international aid workers stationed in the region.

MCI was not prepared to divulge financial details or disclose information on the size of the network itself but was at least able to confirm the deal has been closed. "We were awarded the contract and are on schedule for a June implementation date," says MCI spokeswoman Natasha Haubold.

MCI is the long-distance, fixed-line division of carrier WorldCom Inc., which filed for Chapter 11 bankruptcy protection last year after a massive accounting scandal (see Unstrung's Top 25 Startups and Ex-WorldCom Execs Charged With Fraud). The firm expects to emerge from bankruptcy this fall and plans to trade under the MCI name (see WorldCom Plans Re-Emergence).

The decision to award the project to a company that exited from its wireless reselling business last year and currently has no wireless network in the U.S. has surprised network infrastructure analysts. “MCI have all but disappeared from the wireless space,” comments IDC’s Paolo Pescatore. “You would expect more traditional GSM network vendors to be there, such as America’s Motorola Inc. or Europe’s Nokia Corp. and LM Ericsson. One assumes that MCI has the expertise, but is it really of the same level as the other players?”

Braude, however, stresses the need to put the size of the deal into context. “It is a remedial contract designed to serve the military and aid workers, to provide viable communications. MCI’s award does not mean that it will necessarily win the much larger contracts that are ahead,” he warns. This fact is especially pertinent in light of the Bush administration’s proposal to leave future network decisions to the incoming Iraqi government.

It remains unclear whether MCI will outsource the construction of the network or will attempt the entire project itself. “I would expect them to work with a larger vendor,” says Pescatore. Braude disagrees: “It isn’t a very large contract and it is possible that MCI could manage the network rollout, given its experience with military contracts.” MCI recently built a similar GSM network in Afghanistan.

The deal should at least bring to an end the bitter war of words that broke out in March between CDMA supporter and American congressman Darrell Issa and GSM Association CEO Rob Conway (see US Rep: Vive la CDMA! and GSMA: Back Off, Darrell!). Each man argued that his own favored wireless standard was the best choice for network rollout in a post-conflict Iraq.

Conway wasted little time in using today’s news to tout the advantages of GSM technology over its rival standard. “We have been working with the US Government and MCI to provide GSM, and ensure that Iraq had the right technology for its people, compatible with the rest of the region and the world,” he gushed in a prepared statement (see GSM Body Cheers Iraq Rollout). “The benefits will be immense in both the short and long term.”

— Justin Springham, Senior Editor, Europe, Unstrung

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