The award of the licences has been clouded with controversy, delay and criticism of how the winning three Arab consortia were selected.

"There is an ongoing preliminary inquiry," a US defence official said on Monday when asked about the status of the investigation by the Pentagon inspector general's office.

Three Arab consortia, led by Egypt's Orascom Telecom, Kuwait's National Mobile Telecommunications and MTC, also of Kuwait, were awarded a tender in October to operate in Iraq.

"We have to look at whether the information is credible, whether it alleges a violation of a prescribed standard or whether the information is sufficient to enable a focused investigation," she said.

Favoured businessmen

The tenders have come under strong criticism, with claims that they were awarded on political rather than on technical grounds and favoured businessmen with ties to Arab rulers allied with the United States.

One telecoms industry source, who asked not to be named, said there was a belief some applicants "reworked" their corporate structure to hide the involvement of Arab governments.

Sam Kubba, chairman of the American Iraqi Chamber of Commerce, welcomed the inquiry and said his office had received many complaints about the telecoms deals.

"I am pleased that someone is taking some action now," he said. "The sense is that these deals went to people well-connected to the Iraqi Governing Council and were predetermined."

Over the weekend, the London Financial Times reported that two occupation authority officials who drew up the bids for the phone network and an Iraqi minister were under investigation.