Iran Telecommunications Report Q2 2008

According to Iran's Ministry of ICT, there were just over 28mn mobile subscribers in Iran at the end of 2007, up by 98% from 14.3mn at the end of 2006. Mobile market leader Mobile Communications Company of Iran (MCI) continued to drive much of this growth. According to parent company Telecommunication Company of Iran (TCI), the state-controlled operator had 21.3mn subscribers at the end of 2007, up by almost 56% on the operator's end of 2006 total. Despite controlling over 75% of Iran's mobile market at the end of 2007, it is important to note that MCI's market share has fallen from nearly 96% at the end of 2006. MCI's loss of market share can be attributed mainly to the rise of Irancell, which expanded its subscriber base from 154,000 in December 2006, to 3.72mn by the end of September 2007. Although, at the time of writing, Irancell's parent company MTN had yet to reveal end of 2007 data, press reports hinted that the operator had exceeded the 5mn subscriber mark by the end of the year.

BMI estimates that Irancell had over 5.6mn subscribers by the end of 2007, giving it a 20% market share.

Meanwhile, Iran's Ministry of ICT has elaborated on the terms and conditions surrounding the release of Iran's next mobile operating licence. The Ministry has stated that foreign operators will only be able to have a 49% stake in the new mobile operation, and indicated that Iranian companies will be able to participate in the tender in the form of a consortium. The new mobile operator will be expected to deliver at least 15mn SIM cards, and will be licensed to provide 'next generation' (3G) mobile services. Iran's new mobile operator is expected to launch services sometime around October 2008; at that point, a market review will be carried out to see if the market needs an additional mobile operator.

By the end of 2007, no visible progress had been achieved towards the privatisation of fixed-line incumbent, TCI. In September 2007, the Ministry of ICT announced that 51% of TCI would be privatised before the end of the Iranian calendar year on 20 March 2008. According to reports, the government will retain a 20% holding in the firm and it is understood that there will be no ownership restrictions for foreign investors. As a forerunner to the sale of a controlling stake in TCI, a 5% stake in the operator was scheduled be floated on the Tehran Stock Exchange before the end of December 2007. The floatation of this minority stake did not take place as planned and, in January 2008, it was reported that the reason for the delay was due to the insistence by Iran's Privatisation Organisation that TCI be first established as a fully-licensed telecoms service provider. Iran's regulatory authorities are understood to be currently formulating a licence that will allow TCI to be fully established as a legal telecoms operator.

Iran sits at the lowest position in our latest set of revised Business Environment Rankings for the Middle East. Although Iran receives a relatively high score for its telecoms market, it suffers from having the lowest score in the region for regulatory independence, as well as a relatively low country risk score.