Compared with those in rural and desert areas, the GSM user penetration rate in urban area has reached almost 100%, and PSTN penetration is also very high. The Internet user penetration rate in Iran is 36%.
Telecommunications Company of Iran (TCI), the largest fixed line operator in Iran, belongs to the Ministry of Telecommunications and Information Technology of Iran. TCI’s switching network still relies on the old PSTN network, and awaits a plan of upgrade into NGN. MCCI and MTN IranCell are the largest mobile network operators in Iran. Both MCCI and MTN IranCell have been issued with licenses in 2G network. All the operators in Iran are facing the problem of poor network performance, in order to maintain market share, they have to improve the QoS by continuously upgrading their networks.
The Iran telecom equipment market was dominated by European vendors in the early years, i.e., companies like Nokia & Siemens (Nokia and Simense merged into Nokia Siemens Network in 2006) and Ericsson ruled the market in early periods. Recently, Iran telecom industry has privatized from state monopoly so that operators in Iran started to import technologies from overseas to upgrade the telecom network. This trend seems to indicate opportunities for players outside Iran’s network equipment market, such as Huawei and ZTE. However, the well-established competitors including Nokia Siemens Network and Ericsson still own a majority of the market and can enjoy a lasting advantage of their solid foundation.
MCCI owns 60% of the market share in Iran, with 320,000 customer base and more than 60% postpaid subscribers. Also, MCCI serves almost all the local enterprise customers. As far as MCCI’s core network infrastructure is concerned, Nokia Siemens Network and Ericsson dominated the market in 2010, with 70% and 30% share respectively. They were also the exclusive suppliers in MCCI’s wireless infrastructures where Nokia Siemens Network provided 60% of the equipment and Ericsson occupied the remaining 40% share. Although Huawei showed up as a new wireless equipment supplier for MCCI in 2011, the leading trend by established vendors continues and will not be altered in the foreseeable future.
MTN IranCell was established in 2006, with about 15,000, 000 customer base which is 35% of the market share in Iran. It is the first operator in Iran to provide prepaid mobile services and its core and wireless infrastructures were supplied by Nokia Siemens Network, Ericsson, and Huawei. In 2011, MTN IranCell upgraded its wireless infrastructure with replacement and expansion of microwave transmission and BTS equipment. Both Ericsson and NSN were awarded contracts so that they would be able to further consolidate their leading position in Iran.
New Entries in Iran telecom market, such as Huawei and ZTE, have achieved significant growth in recent years. However, the well-established vendors are still leading the market in terms of market share, resulting from their strong customer base and a deep understanding of the Iran local market. As a result, the young vendors could hardly surpass the existing competitors, due to the following reasons:
Iran operators usually contact a number of new vendors to lower the price. The direct impact is a decline in profit for these vendors followed by a possible drop in product quality. Moreover, the relatively long process for price comparison and contract negotiation consumes the patience of new entries to develop the Iran market.
The political environment in Iran is unstable. The government placed lots of unreasonable requirements to equipment vendors, for example, the government requires that the equipment should be able to trace the user location for safety reasons. New entries in Iran have to slow down their market development, such as Huawei and ZTE have terminated new customer development to rehabilitate its reputation.
The immature market environment in Iran produced lots of projects with no government budget approval. New Entries are usually unaware of these risks when communicating with Iran companies, and finally face up with losses that are beyond their control.
Frost & Sullivan’s suggestions: The existing matured vendors already owns majorities of the market share in Iran’s telecom equipment market, but at the same time Iran’s undeveloped telecom market creates lots of opportunities for new entries, and the market is worth developing. However, Iran’s instable political environment must be considered, which may adversely affect the investment environment and incur project risks. New entries should fully evaluate risks when developing Iran market, try to avoid them, and protect its own rights.
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