Seoul  - North Korea's urgent need to trigger economic growth and an Egyptian telecommunications firm's desire to establish a new outpost were key factors in opening restricted mobile telecom service in the secretive communist nation, analysts said Tuesday.

The Cairo-based Orascom Telecom Holding SAE signed a 25-year contract with the North Korean government in Pyongyang Monday, setting the stage for the establishment of a limited mobile service.

In a country where most of the population of 23 million are denied online and mobile access, the deal was remarkable.

"The mobile launch provides us with a meaningful momentum to further develop our telecom in response to the needs of the IT age," said Park Myung-Chull, president of CHEO Technology JV Company, the North Korean partner in the deal.

The North Korean company will operate under the name Koryolink after it rolls out its third-generation mobile grid to initially cover Pyongyang, with a population of 2 million.

The JV company is 75-per-cent owned by Orascom Telecom, with the remaining 25 per cent held by the state-run Korea Post and Telecommunications Corporation.

Orascom said the initial target is 100,000 North Koreans living in three major cities. "Then, our goal is to build a network to connect 23 million North Korean people," Orascom CEO, Egyptian billionaire Naguib Sawiris, said after signing the contract.

Orascom Telecom has become one of few international companies to invest in the secretive nation, where the economy is ravaged by famine and US sanctions over its nuclear programme.

The firm chose North Korea as its newest outpost to offset a slowdown in Pakistan and Bangladesh. Sawiris said earlier this year that his North Korea investment was part of the company's global strategy to target countries with high population and low mobile penetration.

South Korean analysts say only a chosen few - among government officials, military officers, expatriates working for the United Nations and foreign diplomats - will be initial beneficiaries of the mobile network that the Middle East's largest carrier will be deploying for the next three years, if the contract continues to remain valid.

The mobile launch was positively received by South Korean analysts.

"At a time when inter-Korean economic exchange has been shaken up, the mobile launch can offset North Korea's shaky image with its plan for a mobile buildup," the online newspaper NK Daily said in an editorial Tuesday.

However, the politically risky nature of the mobile agreement was cited as a possible deal breaker. Recently, North Korea forced South Korean businesses to trim down their operations in an industrial park in the border city of Kaesong despite the apparent economic gains those activities brought to Pyongyang.

Past experience has shown that whenever North Korea faces a conflicting choice between protection of its regime and the economy, the choice has always been regime protection, the NK Daily said.

Orascom has revealed that to protect its outlay, it has signed a contingent contract in which it hedges its bets, initially committing only half of its investment.

If the deal is threatened, Orascom may withdraw its equipment and manpower, reducing the value of the network to Pyongyang.

Other contingent options include Orascom's employment of tens of thousands of North Korean workers for its construction projects in the Middle East. That means North Korea could have too much to risk to threaten the deal, the NK Daily editorial said.

The mobile launch is an indicator that North Korea is no longer able to remain isolated. "Even if North Korea tries to block the internet and mobile access, people have already found a way to work around it wirelessly," said Yang Un-Chull, a chief researcher at Sejong Research Institute.

Pyongyang launched a mobile phone service in November 2002 with Loxley Pacific, a subsidiary of Thailand's Loxley Group, but scrapped it after a mysterious train accident in North Korea that killed 160 people in 2004.

Despite the ban on mobile phones, some North Koreans have secretly been using handsets smuggled from China to talk to relatives who have defected to South Korea. (dpa)