Etisalat enters Iran, preps country's first 3G services - Mobile World Live

Etisalat enters Iran, preps country’s first 3G services

09 NOV 2009

Brought to you by Wireless Intelligence

UAE-based Emirates Telecommunications – better known as Etisalat – has expanded its presence in the region by emerging as the winner of Iran’s third nationwide mobile license. As part of a consortium with local telecoms group, Taameen Telecom, Etisalat reportedly beat off competition from several rival operator groups to secure the license, which will make Iran the group’s eighteenth market worldwide. Rival Middle Eastern players such as Zain, Qtel and Omantel, India’s Bharti, and Russia’s three main mobile operators – MTS, VimpelCom and MegaFon – had all been previously linked with the third Iranian license, which was put out to tender last summer.

Etisalat will pay its proportionate (49 percent) share of the €300 million license fee up front, which is in addition to annual government fees of 23.6 percent of revenue throughout the duration of the 15-year agreement. Etisalat acknowledged in its official statement that its revenue-share offer to the government had been a key reason for it securing the license. 

However, in what is being seen as a major coup for the operator, Etisalat is also being permitted to offer the country’s first 3G services on an exclusive basis for the first two years (alongside 2G services). The operator is expected to launch its first services in the third-quarter of the year and will invest a reported US$1 billion in building-out the new network.

Despite often being seen by the West as a risky destination for foreign investment, Iran represents a significant – and increasingly rare – high-growth opportunity for international mobile operators. According to Wireless Intelligence data, Iran was the second-fastest growing market in the Middle Eastern region (after Afghanistan) by the end of 2008, and is already the second-largest market in the region (after Turkey) in terms of mobile connections. However, with mobile penetration at just over 65 percent and a total population of some 73 million, including a sizable youth population, Iran has plenty of room for growth. Wireless Intelligence predicts that the market will surpass 100 million connections by 2012.

The market is currently dominated by the state-controlled Telecommunication Company of Iran (TCI), parent company of Mobile Communications Company of Iran (MCCI), which commands a 63 percent share of the country’s mobile market. The Iranian government is understood to be looking to sell-off as much as half of the operator at some point this year, potentially creating another opportunity for a foreign player to enter the market.

TCI’s only current nationwide competitor is MTN Irancell, a joint venture between South Africa’s MTN (49 percent) and the Iran Electronic Development Company (IEDC). MTN acquired its stake in the operator in 2005 in controversial circumstances following Iran’s decision to block Turkey’s Turkcell from acquiring the company due to its alleged links with Israel. Since then, however, MTN has helped build Irancell into a serious rival to TCI. By the end of 2008, Irancell was matching market-leader TCI in terms of net additions and reporting triple-digit annual growth.

The remaining three networks in the country are regional players, though both Taliya and MTCE have sizable customer bases. Taliya – a SIM-only specialist – currently covers the area around Iran’s capital, Tehran, and plans to expand its network to all the country’s major cities. The operator is targeting 2 million subscribers by the end of first-quarter 2009.

Matt Ablott, Analyst, Wireless Intelligence

Securing Iran’s much-coveted third nationwide mobile license at what appears to be a bargain price is a sound piece of business for Etisalat. As a price comparison, its Middle Eastern rival Zain paid US$6.1 billion for Saudi Arabia’s third mobile license in 2007. Even the sizable chunk of annual revenue Etisalat has agreed to pass to the government is reportedly lower than that levied on the country’s existing licensees. But the operator’s real achievement is negotiating the two-year exclusivity period for 3G services. This should prove sufficient motivation for Etisalat to offer 3G data services – and maybe even mobile broadband – right from the start of its operations. The market for high-speed data services will remain niche in Iran in the short term, but Etisalat is well placed to quickly become a major player in one of the world’s fastest growing markets.

 

Author

Mobile World Live

Mobile World Live is the online service dedicated to providing the mobile industry with daily news coverage & analysis of the biggest global market developments.

Read more

Related

Tags