Etisalat wins in Teheran for Gulf’s last big growth play

Posted by Matthew Reed Wednesday, January 14th, 2009

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In winning Iran’s third mobile license, Etisalat has secured one of the last pure growth opportunities in the Middle East market.

Iran overtook Saudi Arabia as the biggest mobile market in the Gulf in the last quarter of 2007, and the Iranian market has continued to grow at a staggering pace. There were 18.7 million new mobile subscriptions in Iran in the year to end-September 2008, representing about 44% of all new mobile subscriptions in the Middle East over the period. MTN’s Iranian network, MTN Irancell, had 13.14 million subscriptions at end-September, just two years after it launched services.

Etisalat has put new technology at the heart of its strategy, by offering 3G and 3.5G services as soon as it made its debut in Egypt in 2007, for example. And that is likely to have proved attractive to the Iranian regulators judging the license tender, as the third license covers 3G services.

The strong historical and commercial ties between Iran and the UAE may also have helped Etisalat’s case, countering the tensions that also exist between the Arab and Iranian sides of the Gulf, including those between Iran and the UAE over the disputed Tunb islands.

But that doesn’t mean it’s going to be easy for Etisalat. Iran’s mobile penetration rate reached 60.74% at end-September, indicating that the market is beginning to mature. Etisalat will have to offer something different in order to make a mark.

The recent big fall in oil prices could exacerbate structural flaws in the oil-dependent Iranian economy, with an adverse impact on the local telecoms market.

Etisalat hasn’t let that put it off its stride. It’s still focusing on growth and the next target is likely to be Iraq, which had a mobile penetration of just 38% at end-September, and where Etisalat is manoeuvring to buy the third mobile operator Korek Telecom.