SEOUL, South Korea (AP) — Egyptian wireless company Orascom plans to invest up to $400 million in a new mobile phone network in North Korea, one of the world's poorest and most tightly controlled societies.

Hatim E. El Gammal, an investor relations official with Orascom Telecom Holding S.A.E., said Thursday that the network would be the first based on 3G in North Korea.

El Gammal didn't elaborate on the deal but said construction would begin "in the near future."

Orascom said in a statement on its Web site Wednesday that a joint venture subsidiary, CHEO Technology, would offer services throughout North Korea for 25 years under the terms of the deal and exclusively for the first four years.

Orascom, the largest mobile communications company in the Middle East with 65 million subscribers, said it controls 75 percent of CHEO and the rest is held by the state-run Korea Post and Telecommunications Corp.

North Korea, a highly militaristic dictatorship in which dissent is severely punished, has lagged far behind its neighbors economically, with development stymied by years of mismanagement and isolation.

Still, the country has a working mobile phone network that covers the capital, Pyongyang, and some outlying areas. The network is based on the GSM, or global system for mobile communications, standard.

Mobile phone use, though not widespread, was once increasingly visible among North Koreans. Visitors to the country say it has markedly declined since 2004.

Orascom's investment will cover network infrastructure and license fees for the first three years "to rapidly deploy a high quality network and offer voice, data and value added services at accessible prices to the Korean people," the statement said.

The deal "is in line with our strategy to penetrate countries with high population and low penetration by providing the first mobile telephony services," said Naguib Sawiris, Orascom Telecom's chairman and CEO.

It operates networks in Algeria, Egypt, Pakistan, Bangladesh, Tunisia and Zimbabwe and previously had a business in Iraq.

North Korea, which carried out an underground nuclear test in 2006, has been negotiating with the United States and other countries to receive aid and political concessions in exchange for abandoning its nuclear programs.

The country has also taken some steps to liberalize its dilapidated economy in recent years, and it courts foreign investment.

Alex Kuznetsov, an analyst at Bear Stearns in London, estimates that North Korea will achieve 20 percent wireless penetration in 2012 and Orascom will begin turning a profit on the venture two years before that.

Though Kuznetsov acknowledged that political risk is "quite a serious factor" in North Korea, Orascom's background in other emerging markets suggests it can succeed.

Orascom Construction Industries, also of Egypt, said in July last year that it signed a deal with a state-owned North Korean trading firm to acquire a 50 percent stake in a local cement company near Pyongyang.

Lafarge SA of France announced in December it was acquiring Orascom's cement businesses. Lafarge shareholders approved the deal this month.


Via [Mlive]