As conflict in Iraq is getting tough, risks for the region's telecom operators are increasing as well. So far operational disruptions were limited to internet outages. However wider blackouts, reduced consumer spending, infrastructure and retail store damage may unfold should the crisis escalate. Also, increasing sovereign risks highlights the potential for currency devaluation for Iraqi dinar, which remains pegged to the USD. Iraq represented 40% of revenue for Kuwait's Mobile Telecommunication Co. (Zain.KSE) and 20% for Ooredoo (ORDS.QE) as of Q1 2014, according to Bloomberg.

In its report, Mubasher Trade and Research stated that Asiacell Communications, Ooredoo's subsidiary in Iraq (64% stake owned), represents about 20% of total revenues with 10mn subs as of Q1 2014. Meanwhile, Zain Iraq, Zain's subsidiary in Iraq (76% stake owned), contributes about 40% of revenues with around 16mn subs as of Q1 2014. Zain Iraq was supposed to launch IPO by July to list about 25% of its shares. However, due to the violence the country currently witnesses, it is most likely that such plans will be delayed. We believe this would have a negative effect on both operators ,especially with the existing probability of the Iraqi dinar devaluation, with more adverse impact on Zain due to the large contribution Iraq represents to Zain.