Etisalat will take advantage of its 3G exclusivity in Iran

The members of Etisalat’s international investment team must be feeling pleased with themselves.

Not only has the firm won Iran’s third mobile license – and therefore become a player in one of the last major growth markets in the Middle East – but it has secured the right to be the only 3G operator in Iran for two years.

The rate of growth in Iran’s mobile market in the past few years has been remarkable. Iran overtook Saudi Arabia to become the largest mobile market in the Gulf region in late 2007, and the country’s operators added 19.09 million subscriptions in 2008, according to estimates by Informa Telecoms & Media.

Although the rate of growth in Iran will slow in 2009 – to 11.42 million net additions – according to Informa forecasts, it will still be the fastest-growing mobile market in the region by some distance. At end-3Q08, mobile penetration in Iran – a country of about 71 million people -was 60.74%, much lower than in any of the GCC member states on the other side of the Gulf.

So there is still plenty of room for growth in subscription numbers in Iran, and there is considerable opportunity for growth in data services in the country too. Etisalat will be able to target both opportunities.

Perhaps more than any of its peers, Etisalat has put new technology at the heart of its strategy, saying that in this way it can future-proof itself because it will be able to offer the most up-to-date services and because the latest systems are cheaper in the long run.

For example, Etisalat launched a 3.5G network in Egypt on its debut in the country in May 2006, becoming the country’s first 3G operator. And Etisalat’s Saudi unit, Mobily, said in December that it had 300,000 mobile broadband subscriptions.

In Egypt, Etisalat had the 3G market to itself only briefly, since Vodafone launched its own 3G network within a couple of weeks, and Egyptian market leader Mobinil launched a 3G network in September. But in Iran, Etisalat has a two-year exclusivity period for the provision of 3G services.

When Etisalat launches services – in six to nine months, according to company executives – it will most likely offer HSDPA services from the outset, as it did in Egypt. And that will enable Etisalat to offer data services such as mobile broadband and target Iran’s largely untapped broadband market, without any competition from Iran’s other two mobile operators.

Etisalat’s deal in Iran was a bargain: The license fee was only ?300 million (US$399 million), of which Etisalat is paying 49%, in line with its 49% stake in the consortium that won the license. Etisalat’s local partner is Tameen Telecom, an Iranian public-sector investment fund. The new operator will reportedly pay 23.6% of revenues to the Iranian government, though MCCI and MTN Irancell pay 28%.

Etisalat also plans to spend US$1 billion on its Iranian network, though that figure pales in comparison with the US$6.1 billion Zain paid for Saudi Arabia’s third mobile license.

The Iranian license takes Etisalat’s footprint to 18 countries and is another step in the UAE operator’s transformation into a major international operator. Etisalat was the second-fastest-growing operator in the world in the 12 months to end-3Q08, according to research by Informa. And it plans to continue its international expansion. Iraq’s Korek Telecom, which Etisalat has been negotiating to take over for several months, is the next likely target.

There are more opportunities coming up in Iran too. A national WiMAX tender is under way, and the government plans to sell half of fixed-and-mobile incumbent TCI (parent of MCCI) in a privatization that could begin as early as March.

Leave a comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.