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Millicom leads the pack as competition belatedly arrives in Iran mobile market

26 May 2005

Luxembourg based mobile group Millicom International Cellular (MIC) yesterday launched its long-awaited pre-paid GSM service in greater Tehran, belatedly bringing some semblance of competition to Iran’s mobile market. MIC has a contract to manage the network of a new cellco for domestically owned Rafsanjan Industrial Complex (RIC) with the service to be marketed under the RIC brand. RIC will own the cellco under the terms of a two year build, operate and transfer (BOT) with state owned incumbent operator Telecommunications Company of Iran (TCI). The BOT provides for the rollout of up to two million new mobile lines. MIC is to be paid a share of the revenues generated by the network and has an option to acquire 47% of the company at the end of the build period. MIC has been attempting to launch services in Iran since agreeing a BOT contract of its own with the government in early 2003, but that project, which promised to deliver five million lines, stalled amid legal wrangling.

TCI’s mobile subsidiary MCCI is the currently the country’s only national wireless operator and dominates the market accordingly. MCCI’s mobile network is overloaded and desperately in need of investment and even in the capital Tehran it is difficult to gain a call signal or find signal strength good enough to make a call. State owned Payam Kish holds a GSM-900 licence for the island of Kish in the Persian Gulf, but has failed to make any significant impact on TCI’s share of the market. A consortium led by Turkcell of Turkey was awarded Iran’s second national GSM licence in February 2004, but plans to become the country’s first privately run wireless network are still on hold following government opposition to the prospect of a Turkish owned company entering the market, with hardliners questioning the consortium’s links to Israel. The part-private Mobile Telecommunication Company of Esfahan holds a licence to operate services in the province of Esfahan, but has yet to launch commercially due to – yes, you guessed it – legal wrangling.

In the prolonged absence of a second national operator, the state has been looking to launch BOT projects to remain on course to meet ambitious targets of boosting penetration beyond its current figure of around 5%. There is certainly plenty of scope for Iran’s mobile market looks to become big business. Although many major telcos have established themselves in the Middle East, Iran, the region’s second largest state, was for a long time virgin territory. With the country emerging from an extended period of economic and political isolation, opportunities exist to capitalise on the state’s desire to adopt privatisation and foreign investment as tactics for combating unemployment and kick-starting the economy.

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