Bahraini telecommunications firm Batelco announced it has launched the first private mobile phone system in Baghdad.
"The introduction of a private GSM system allows local Iraqis as well as aid workers and foreign investors to communicate freely and easily," said Batelco's regional operations manager Rashid Senan in a statement.
The service was installed at nearly $5 million dollars.
The Bahraini firm said some telephones would be distributed free of charge to police, fire and ambulance crews to help "reduce crime and improve security in Baghdad".
MTC-Vodafone, Kuwait's largest mobile operator, also confirmed it has started offering services to its oil-rich neighbour but not in the capital.
The company's Deputy Director General Khalid al-Hajeri said the firm has secured a contract with the occupation authorities in Basra.
Officially, a tender for three mobile phone licences by the US occupying administration across Iraq has not yet taken place. Firms have until 28 July to express their interest in building and running networks across Iraq.
A senior occupation official said the development was "bizarre". It is not clear how the new services will have an affect on the tenders.
Callers with foreign-registered GSM phones were able to make and receive calls and send text messages to countries as far away as the United States and South Africa.
“MTC-Vodafone wishes you a pleasant stay in Kuwait,” said one text message sent to roamers in Baghdad.
French versus US technologies
The US occupying administration invited potential bidders last week to express their interest for the telephone licenses.
Crossed wires: Most Iraqis just
want their landlines restored
The licenses are perceived as one of the most potentially lucrative contracts to be offered in Iraq, where mobile phones were banned to all but senior officials connected to a special network.
US Republican congressman, Darrell Issa, has been lobbying for the US government to adopt a mobile phone network in Iraq using American-developed Code Division Multiple Access (CDMA) technology instead of the Global System for Mobile Communications (GSM), widely used in Europe.
The GSM standard system is used across Europe and the Middle East.
In an open letter to US Defence Secretary Donald Rumsfeld, Issa said: “If European GSM technology is deployed in Iraq, much of the equipment used to build the cell phone system would be manufactured in France, Germany and elsewhere in western and northern Europe. Furthermore, royalties paid on the technology would flow to French and European sources.”
The CDMA standard is developed by California-based Qualcomm Incorporated, which Issa represents.
US occupation troops and development workers currently use a network in Baghdad built by Worldcom Incorporated, a bankrupt US telecommunication firm that is doing business under the name MCI.
Under Saddam Hussein, ordinary people were not allowed to own or use mobile phones thanks to a strict ban imposed by the regime.