Etisalat plans up to $5 bln 5-year Iran investment

RIYADH, Jan 25 (Reuters) - Emirates Telecommunications Corp (ETEL.AD: Quote, Profile, Research, Stock Buzz) (Etisalat) expects to invest up to $5 billion over five years in its Iran operations after winning the country's third mobile phone licence, its chairman said on Sunday.

"We will invest $4 billion to $5 billion in the Iranian operation in five years," Mohammed Hassan Omran told reporters at an economic conference in Saudi Arabia.

He said Etisalat, the second-largest Arab telecommunications company by market value, would spend $1 billion in the first year on its network in Iran.

Asked how the plan would be financed, Omran said Etisalat had 10 billion dirhams ($2.72 billion) in cash reserves deposited with banks in the United Arab Emirates. He did not elaborate.

"We have not signed the contract yet with the Iranians for the licence," Omran said, confirming that Etisalat would pay 300 million euros ($389 million) for the licence.

Tehran confirmed this month that a consortium made up of Etisalat and Iran's Tamin Telecom had won an international tender for the licence. [ID:DAH256465]

Etisalat has said the group would have exclusive rights to provide third-generation (3G) services and it hoped to get at least 1 million subscribers in the first year of operation.

Iran has a mobile penetration rate of less than 60 percent, in a market where about half of its 70 million population is under 25 years of age.

Iran's nuclear row with the West has deterred many foreign companies from doing business in the country. U.S. sanctions bar U.S. companies from doing business with Iran, and United Nations sanctions have made other firms wary of investing there.

However, analysts say the size of the market and its energy riches still make it an attractive investment prospect.

The current telecoms operators in Iran are the state-owned Iran Telecommunication Company (TCI) and Irancell, which is 49 percent owned by MTN Group (MTNJ.J: Quote, Profile, Research, Stock Buzz), sub-Saharan Africa's biggest mobile phone company.

Etisalat, which operates in 18 countries, is one of a number of Gulf Arab telecom operators that have expanded overseas after losing their monopolies at home. ($1=0.7719 euro) ($1=3.673 UAE dirhams) (Reporting by Souhail Karam; writing by Firouz Sedarat, editing by Will Waterman)