BMI View: Iran's telecoms market is an underperformer in the Middle East as a result of political and economic risks, exacerbated by currency depreciation. Access to the latest devices is limited. The UN Security Council's unanimous vote in July 2015 to lift the sanctions against Iran, following a deal on Iran's nuclear programme, however, warrants an optimistic outlook. BMI's Country Risk team has made a slight upward revision to our economic growth forecast for Iran, projecting real GDP growth to pick up from 0.6% in 2015, to 2.9% in 2016 and 3.6% in 2017. This is also likely to have a positive effect on the mobile market and potentially attract more foreign investment. Although mobile penetration in Iran is relatively high at 136.1%, BMI believes that there is further scope for growth. Data services, in particular, will grow at an average rate of 36.2% CAGR over the next five years. Iran's second biggest mobile operator MTN Irancell has launched 3G and 4G services and market leader MIC is planning to do so in the very near future.
We estimate that fixed-line connections increased by 3.0% in 2014 and we expect growth to slow down in the forecast period because of fixed-mobile substitution and a greater focus on mobile services from fixed incumbent TCI.
We estimate that the country ended 2014 with over 111mn subscribers, boosted by MTN's performance in the latter part of the year after it launched 3G services.
We estimate there were around 9.9mn 3G subscriptions at the end of 2014 and forecast a figure of 18.9mn at the end of 2015 and we expect the rapid growth to continue over the short term as more operators launch advanced services.
Key Trends And Developments
Iran's nascent 3G/4G market is expanding and BMI forecasts it to grow an average of 36.2% over the next five years to 2019. MTN Irancell joined Rightel in offering 3G services in the country, launching its network in August 2014. The operator also launched the country's first 4G network in December 2014, looking to take a lead in the mobile data market. In April 2015, only eight months after launching its 3G network, MTN Irancell claimed that the number of data subscribers on its network has increased to more than 21mn, including 7mn on its 3G and 4G networks. The operator now offers 3G services in more than 200 cities and has introduced its 4G network in more than 50 cities throughout the country.
|e/f = BMI estimate/forecast. Source: BMI, IDA, operators|
|3G & 4G phone subscribers, '000||1,100.0||1,600.0||9,920.0||18,947.2||27,473.4||34,067.1||39,177.1||41,527.8|
|Monthly Blended ARPU, IRR||47,692.8||49,488.9||48,928.8||47,099.7||46,202.5||45,758.3||45,758.3||46,206.9|
|Broadband internet subscribers, '000||3,076.2||3,694.5||4,531.3||5,417.2||6,403.1||7,482.1||8,641.8||9,864.6|
Iranian Net Communication & Electronic Services will reportedly deploy fibre-optic FTTx broadband networks, with download speeds of up to 20Mbps, in seven cities in Iran. Iranian Net will install 500,000 access ports in Karaj, Shiraz, Tehran, Isfahan, Tabriz, Mashhad and Qom by the end of H117.
MTN Group has stated that easing of sanctions against Iran would enable it to transfer around USD1bn accumulated dividends and a loan repayment from its Iranian subsidiary. The company has thus far been restricted from taking money out from its Iranian subsidiary.
MTN Irancell claims that the number of data subscribers on its network has increased to more than 21mn, including 7mn on its 3G and 4G networks. The rise was supported by the expansion of its 3G and 4G networks, providing speeds of up to 150Mbps. The operator offers 3G services in more than 200 cities and has introduced its 4G network in more than 50 cities throughout the country.
The Iranian government has imposed maximum limits on how much the operators can charge for their data. MTN revealed in its annual report that on 22 December 2014 that the regulator set a maximum tariff of IRR0.5 per KB for post-paid data and IRR0.75 per KB on pre-paid price plans.