Digital Iran: Reformist Government Lays the Foundation for Telecom Growth

Euromonitor International’s Iran Digital Consumer-Landscape Country Briefing focuses on one of the most promising telecom markets in the Middle East, a country that is emerging from a long period of economic isolation. With the lifting of economic sanctions in January 2016 by the USA and EU, Iran has attracted significant interest from investors, who have been lured by the government’s commitment to technology development and large educated youth population. The country is home to the largest internet user and mobile subscriber base in the Middle East though the quality of services has lagged due to network underinvestment. However, the reformist Hassan Rouhani administration has lifted restrictions on internet speeds and issued mobile broadband licenses. Iranian telecom faces issues such as opposition from conservative sections of the religious establishment, online censorship and income inequality.

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Low voice call rates boost mobile penetration:

  • The government has focused on technology development in its sixth five-year plan for the period 2016-2021. This is in keeping with ongoing reforms to enhance the business environment by promoting innovation and delivering improved telecom services;
  • The administration has sought to improve quality of internet services in keeping with demand from young urban consumers. The maximum internet speed limit of 128Kb/s was lifted in September 2014 and over 2016-2021 internet speeds will be increased to a minimum of 20.0Mb/s. An investment of US$15.0 billion will be made to this effect;
  • Iran figured in the top ten nations in the Middle East in terms of mobile calls made per mobile subscriber as of 2015. The country had one of the lowest voice call rates in the Middle East with the average price of a one minute call below all countries in the region except Yemen and Syria;
  • Household smartphone penetration is expected to exceed PC penetration in 2016. With smartphone usage growing fast, smartphones constituted over 40.0% of total mobile phone market by retail volume as of 2015;
  • In 2015, Qom had the lowest household fixed-broadband penetration while the capital Tehran was the leader in terms of broadband access. Broadband penetration witnessed the fastest growth over 2010-2015 in Tehran followed by Khuzestan and Chaharmahal and Bakhtiari. Moreover, penetration of PCs increased the fastest in Alborz followed by South Khorasan and Mazandaran.

Better internet infrastructure to drive e-commerce uptake

Iranian telecom operators have drawn up major investment plans to modernise legacy networks and deliver improved services in line with the government’s focus on technology. In June 2016, the fixed-line incumbent Telecommunication Company of Iran (TCI) signed an agreement worth US$1.3 billion with a foreign vendor for network upgradation. Cooperation agreements have also been signed with South Korean telecom operator KT Corp and Italian equipment vendor Italtel. With the government pushing ahead with 4G spectrum auction in 2016 and investing in faster internet services, e-commerce is expected to receive a further boost. The country already has a number of home-grown online marketplaces such as Digikala and Bamilo, which have witnessed rapid growth in recent years. Internet retailing expanded by over 200% in real terms during 2010-2015 and is expected to grow by 189% in the next five years.

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