Iran Telecommunications Report Q1 2009 - Companies and Markets New Analysis

Figures from Iran’s two leading mobile operators, state incumbent MCI and second-ranked MTN Irancell, have led BMI to estimate that there were just over 43mn mobile subscribers in Iran at the end of September 2008. This gives a y-o-y growth rate of 77%. Although we expect the rate of mobile growth to start to decrease, for the next few years,

we predict it will remain strong. At the end of 2008, we estimate that the penetration rate for mobile subscriptions was at 63.6%. We expect it to break through 100% in 2010, following very strong growth. By 2013 we believe the mobile penetration rate in Iran will have topped 150%, indicating a big change during the next five years.

Unsurprisingly, there is a lot of investment interest in Iran’s mobile market, in spite of the numerous difficulties presented by investing in a country that is at odds with the US and the UN, is still very much state dominated and has international economic sanctions on it. The biggest upcoming opportunities to invest in the market will be the auctioning of a new national mobile licence, which will possibly include Iran’s first 3G concession, and the selling of a stake in the state-owned incumbent fixed-line operator TCI, which also owns MCI and the leading internet services provider DCI. Both of these sales were originally supposed to take place during 2008. Numerous delays have taken place, and no official date has been given for either, but BMI is hopeful that both will take place during the first half of 2009.

Companies from Turkey, Russia, Indonesia, Malaysia and India, among others, have all supposedly expressed serious interest in one or both of these prospects, and fresh foreign investment will no doubt boost the market.

Iran’s fixed-line market is still growing, helped by the government’s commitment to improving rural connectivity. Growth, however, is slowing, thanks mostly to the increasing popularity of mobile services.

At the moment, not all of the country even has access to mobile services, and, as they are spread, BMI anticipates that the rate of growth for fixed-line will decrease. However, we believe that, unlike many other countries in the Middle East and the rest of the world, the fixed-line market will continue to grow for at least the next five years. Growth in the broadband sector, however, continues to be very slow, thanks to the government’s harsh restrictions on residential broadband services. Until these restrictions are lifted, we do not see this segment of the market taking off.

Iran remains in eleventh position in our latest set of Business Environment Rankings for the Middle East.

We expect Iran´s state-dominated economy and ongoing political wrangling with the US and UN over its nuclear enrichment programme to remain the key barriers to creating a healthy investment climate.

However, Barack Obama’s election as US president may yet improve matters.