Global Insight Perspective | |
Significance | The licence will allow Etisalat to offer services to an additional 70 million customers giving it the highest population coverage in the Middle East. The licence is one of the last available in the region, definitely one of the most sought after |
Implications | Although the cost of the licence is yet to be announced, ARPU levels in Iran are amongst the lowest in the Middle East making Etisalat rely purely on targeting the mass market |
Outlook | Etisalat is poised for high growth, in most of its regions of operations. Although it is a third entrant in a large market the low penetration will enable it to attract new customers rather than churning from existing operators. |
Etisalat has submitted the highest bid for Iran's third mobile licence, although the cost of the licence was not revealed, it fended off strong international players including Qtel, Omantel, and Reliance and Russia's three largest mobile operators—Mobile TeleSystems (MTS), VimpelCom, and MegaFon. Of the above mentioned names only Qtel would have been a serious contender for the licence; the Russian operators have primarily been focusing on their domestic markets and Reliance has submitted bids for Middle Eastern licences throughout 2007 and 2008 and is yet to come out on top.
The Iranian mobile market has been underserved due to a lack of liberalisation and currently has only two main mobile companies. This has led to mobile penetration levels many times lower than neighbouring Arab countries. Currently mobile penetration stands at around 41.8%, equivalent to 29.7 million users, measured at the end of 2007. Prior to 2005, the incumbent, Telecommunications Company of Iran (TCI), operated two types of mobile services, with one under the brand Taliya providing pre-paid services, but was limited to six million subscriptions and operated in only 15 cities. The second, Mobile Company of Iran (MCI), provided both pre-paid and post-paid services, as well as international services, and operated in 1,016 cities. This effective monopoly kept penetration levels below 15% until the entrance of Irancell, which is 49% owned by MTN. Irancell won a mobile licence towards the end of 2005 and began operations by the end of 2006. This stimulated the market and mobile penetration levels reached 23% in the year of its launch. As of April 2008, Irancell stated it had a 30% market share and the MCI/Taliya partnership held the remaining 70% with around 23 million customers, compared to Irancell’s nine million (see Iran: 1 September 2008: Qtel and Etisalat Consider Third Iranian Mobile Licence).
Outlook and Implications
The operator has done well to enter one of the largest markets within the Middle East giving it coverage to an additional 70 million potential customers giving Etisalat the highest population coverage in the Middle East.
- Etisalat Investment Strategy: The licence win by Etisalat is part of its strategy to enter markets which are highly populated with low penetration rates—typically emerging markets. Etisalat’s domestic market shows very little room for growth as mobile penetration has reached 170% in the United Arab Emirates. Within the MENA region, Etisalat has also expressed interest in other low mobile penetration markets, illustrated by its 51% stake in Algerian incumbent Algerie Telecom, and in Lebanon where the government is planning on liberalising the mobile market.
- Market Share Outlook: The second operator has done very well to take a 30% market share within a few years of operating, this is on par with most other Middle Eastern operators which have broken monopolies. Etisalat's key benefits lie in its strong Middle Eastern brand and its entry into a low penetrated market. The availability of new customers will mean that it can achieve a market share of almost 15% within the first year of operations.
- Services: As yet, no details of services or launch dates have been announced. Currently only GSM is available in Iran making its difficult for operators to differentiate their services. Brand identity, quality and price will be Etisalat's key selling points until further services can be deployed.