The Business Year

V. Sadoughi

IRAN - Telecoms & IT

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CEO and Member of the Board, the Mobile Communications Company of Iran (MCI)

Bio

V. Sadoughi has a BsC in Electronics Engineering, and became CEO of Iran Electronic Components Industries in 1995. Following several executive positions at companies including Shiraz Electronics Industries and the Electronics Research Institute, he became CEO of the Mobile Communications Company of Iran in 2006.

You are the number one mobile communications provider in the region. How do you shape your competitive strategy? We have one national asset—we were the first operator to enter the […]

You are the number one mobile communications provider in the region. How do you shape your competitive strategy?

We have one national asset—we were the first operator to enter the market with the largest customer base. After the second provider entered the market, we tried to strengthen our competitive advantage against our rivals, and our main advantage was the coverage we provided. We tried to utilize and shape this competitive advantage by leveraging our coverage and providing more services to be more attractive to customers. In the last six years, we haven’t increased our prices and we have tried to keep them constant. Although inflation increased the prices of goods and services, we tried to manage our tariffs, providing more high-quality services. Being a state-owned company, the government was the only shareholder and it was not looking for much profit. We tried to improve coverage in rural areas, and after being privatized, MCI increased its coverage span, offering high-quality and more competitive and innovative services.

ICT is a fast-growing sector in Iran, with positive spillovers into the non-prime sectors of the economy. Which ICT-related areas do you consider need further investment?

In the ICT market, broadband remains an underinvested segment. Based on our license, we are not allowed to launch our mobile broadband services yet. As part of its M&A strategy, MCI acquired 40% of a broadband service provider called MobilNet, which provides wireless broadband services via WiMAX technology and has a nationwide license. The broadband world is actually the most attractive, but it is underdeveloped in Iran. If you look globally at a country level, investments in the upstream oil industry need more attention. Value-added services over mobile technology seem to be very attractive for further investments, including mobile financial services, mobile payments, mobile banking, and machine-to-machine (M2M) services. When the broadband system expands, broadband-related services grow apace. The third underinvested sector is devices; 12 million tablets have been purchased in the country, and we are planning on rolling out our chain store to provide complementary services rather than just basic connection services. The increased presence of smartphones in the mobile industry and the market for applications is explosive. One of our own strategies is to build local app stores to protect the Farsi language and meet local demand.

How important is it to link your brand to VAS and mobile devices?

Globally, there is a war between mobile operators and content providers. We believe that to shape the value chain and sell content and applications we should maintain a focus on content. For example, US companies such as Google and Facebook offer well-known applications such as Google Talk; the content provider sells it to the customer, and he or she can use any kind of connection for voice, video, or SMS without paying the operator the cost of the service. We, as an operator, spend money and build the network infrastructure, and someone else will use it and make revenues from our network. If we provide internet services, we can connect our users. However, if people use voice over IP, the operators are globally trying to charge customers with different models based on the content. This is a global war, and if operators do nothing they will lose market share to content providers.

“The mobile industry and the market for applications is explosive.”

How will the dynamics among the current operators change with the introduction of 4G to the market, and what major trends are you anticipating?

The regulators considered a two-year exclusivity protection period for service providers, and this period will end in June 2013. Both MCI and MTN Irancell will be allowed to launch mobile broadband services after the approval of the operator. We are going to invest in mobile broadband technology. Therefore, MCI is going to bring 4G to the market. Globally, 4G is not as developed as 3G. This will allow MCI to think about how to be compatible with and evolve 4G technology and introduce it to the market for the people. One of the big concerns is which new technology we are going to choose to invest in and how it can increase our productivity. The company’s approach is to go toward 4G because the cost per megabyte is cheaper than 3G.

What are your plans to develop infrastructure and in which direction are you planning to take your capital expenditure in 2012 and 2013?

The GSM network has two main types of equipment: the first is the radio network that you can see from the streets, and the second one is the core network. Starting in 2011, there were several initiatives designed to modernize the core network and replace what has been installed in the past 18 years in order to manage and prepare for the broadband connectivity of the future. By the end of 2012, the radio network will be replaced and modernized, and this requires an investment of $600 million. We are going to replace the system that we bought from Siemens; since the acquisition of Siemens by Nokia, the equipment has not been upgraded. We would like to provide more capacity for the network and increase demand.

Also, we are thinking about becoming an international operator. We have investigated many operators in the region, and our focus is on buying assets from them. The National Development Fund can invest in our international operations, helping us in this international M&A process.

MCI offers a variety of mobile services. How do you shape your services and which segment of the market are you targeting the most?

Within MCI’s strategy, customers are being defined and segmented. We identify the requirement of our high-value customers that use the network the most, and classify them as VIP users, addressing them with their own specific services. We know the age of different customers and keep track of them; for these VIPs, we offer special campaigns. Another segment is business customers—we plan to identify business customers and meet their demands with specific solutions such as VPN and discount offers. We have distinguished capabilities with these types of customers and we have a wider coverage span than the banks. MCI aims to leverage its connectivity in order offer unique services like mobile banking.

What is your economic outlook for 2013 and what do you expect from your five-year strategy 2010-2015?

In 2011, our earnings per share (EPS) figure was $0.60, and by end-2011 it was $0.74. We had 36% net income growth in comparison with the previous year. In 2012, we project an EPS of $0.98 per share. We are focusing on reaching $6.6 billion in revenues by the end of 2012, with $6.2 billion in operational revenues. The rough estimation for 2013 is 30% growth in revenue and income.

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