Mobile phones unexpectedly sprang to life earlier this week when the Bahraini service provider, Batelco began offering service to foreign registered mobiles.
Although few Iraqis have suitable phones the new service quickly replaced pricey satellite phones as a major means of communicating abroad for businessmen and journalists.
But the new service provider could throw a wrench into American plans for a tender next week for three mobile phones licenses it plans to offer across Iraq.
"We have asked them to turn it off," a spokeswoman for the Coalition Provisional Authority (CPA) told Reuters on Saturday. "They are not licensed to do that."
But Batelco officials said they had already spent $5 million on infrastructure in Baghdad, was offering pre-paid cards, and did not want to stop.
Batelco, partly owned by the Bahraini government, said it asked the US-led occupation administration for a license and planned to invest over $50 million in Iraq. It said it would ask to continue operating at least until a tender is sorted out.
"We don't want to create enemies..."
Rashid al-Snan, Batelco official
Regional Operations Manager Rashid al-Snan said Batelco had initially installed its network without a license because "there was no licensing authority".
"We don't want to create enemies...We are here to help," Snan said. "There is a huge demand for the service. We would like the opportunity to continue to work."
The mobile network licenses are among 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 while Saddam Hussein was in power.
Service to stop “soon”
The CPA spokeswoman said she expected the Bahraini roaming service, which is shaky and occasionally disappears for stretches of time, would stop "soon".
She could not say exactly when licensed mobile service might arrive in Baghdad, where roughly half of land lines remain out of service more than three months into the US-led military occupation.
But she said it should be "weeks rather than months". The CPA invited expressions of interest last week and plans to request license proposals next week. They would be due 14 days later.
Asked if Batelco would be barred from the tender or treated unfavourably if it continued to provide service, she said: "It's an open competition".
A spokesman had earlier said the tender would be decided "purely on the basis of value for money".
An official for MTC-Vodafone in Kuwait, whose roaming service also appeared briefly this week before vanishing, said his firm began work in Iraq two months ago to reinforce service for the US and British armed forces.
Foreign journalists and business-
men wasted little time using their
mobiles when the service was up
"It's a limited service and I have no information on its use by the public," he said, adding that MTC-Vodafone would participate in a telecoms tender conference in Amman next week.
Rival Kuwaiti Wataniya Telecom said it was also interested in the tender and would participate in the conference.
The US Army and development workers now use a network in Baghdad built by WorldCom Inc, bankrupt US telecom firm that is doing business under the name MCI – but service is barred to ordinary Iraqis.
Iraq has not yet decided whether to use US technology or the rival, more widespread European GSM system that is used throughout the rest of the Middle East.
A decision to use the global system for mobile communications standard (GSM) would be a blow to US firms hoping to build a wireless network in Iraq based on the CDMA (code division multiple access) standard developed by California-based Qualcomm Inc.
Darrell Issa – a US congressman from California – has in the past called for the CPA to mandate the use of the Qualcomm technology, a company from which he has received campaign contributions.
But GSM technology would allow Iraqi mobile phone users to travel to neighbouring countries without changing phones.