Iran Telecommunications Report Q3 2012

Although growth in Irans mobile market slowed in 2011, it was not as slow as expected and we estimate the market expanded by around 13% y-o-y, raising penetration to over 100%. MTN Irancell, the countrys second largest operator, had a strong Q411 with more than 1.3mn net additions, and updated info on its market share led us to revise our estimates for rival MCI, owned by incumbent operator TCI.

We estimate MCIs subscriber base grew by 10.6% y-o-y in 2011, lower than 16.6% growth posted by Irancell but enough to keep its dominant market position. As a result, we have amended our forecasts. We continue to expect the market will exhibit slowing y-o-y growth rates, and now predict penetration will be just under 130% by 2016.

Our forecasts for Irans fixed-line telephony and internet sectors remain unchanged. Both fixed-line and internet penetration rates are relatively high while, at 2% at the end of 2011, broadband penetration is very low. This reflects the way in which most Iranians access the internet, for the most part through educational facilities and internet cafés. This in turn is a consequence of high broadband tariffs and low consumer spending power and may also be indicative of the high degree of regulation and control on the sector by a government concerned about the spread of outside information within Iran. In April 2012, it was reported that the first phase of the Iran National Internet Network would be launched by May 21. The halal network, which will restrict content not compatible with Islamic culture, will be complemented by a local datacentre, search engine and domestic email service.

Irans third nationally licensed mobile operator launched services in late November 2011 after receiving a licence for 2G and 3G services in April 2010. According to MTN, which continues its active engagement with the Iranian authorities to clarify its position regarding the provision of 3G services, the service was launched in a limited area only. BMI believes there is demand for 3G services in Iran due to the growth of data revenues at Irancell but we do not expect 3G services will become widely available in the near future. The new operator, Rightel, is reportedly owned by Irans Social Security Organization which, in BMIs view, is unlikely to have the expertise, experience or financial resources for Rightel to become a serious contender in Irans mobile market. Development of 3G services may also be constrained by the governments concerns at allowing Iranians access to the World Wide Web.

Iran retains 14th place in BMIs Risk/Reward Ratings for the Middle East And North Africa (MENA) region, ahead of Libya at the bottom of the table. The high degree of state control and regulation in all sectors of the telecoms market, weak macroeconomic environment and reduced consumer spending power following cuts to subsidies on utilities and fuel, spiralling inflation and the more stringent sanctions imposed by the international community in late 2011 all drag on the countrys score.

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