The rapid roll out of fixed-line and mobile telephony is being mirrored in the swift adoption of new internet infrastructure.

Iran saw significant gains in the development of its telecommunications “infostructure" in 2010, and maintained pace with other regional telecoms markets hit hard by the financial crisis over the last two years. Currently, Iran's telecoms market is the fourth largest market in the region with projected earnings to surpass the $9.2 billion earned in 2009, and the country is on pace to continue its growth to a projected $12.9 billion by 2014.

Although the telecoms sector in Iran still faces some regulatory barriers hampering growth, foreign investment continues to increase. Factors contributing to this investor confidence include the successful opening up of the telecoms sector, which began in 2001, by the majority state-owned Telecommunications Company of Iran (TCI). Privatization efforts have opened up the mobile phone user subscriber base and have encouraged the capital expansion of foreign-owned private mobile phone companies like South Africa-based MTN Group, which operates MTN Irancell, one of the national mobile phone operators that projected a year-on-year growth rate of 10.3% for 2010.

Iran's telecommunications network has the highest growth rate in the Middle East with increased penetration in fixed and mobile telephony, and a rapidly growing internet subscriber base. All three areas of growth are due to measures put in place by the Ministry of Communication and Information Technology—MCIT (formerly known as the Ministry of Posts and Telecommunications) as far back as the early 1990s during the first of five separate Five-Year Economic Development Plans (FYDPs).


Iran continues a policy of adding more fixed-line subscribers to its current base, contrary to the fixed-line teledensity initiatives in the region that are pouring resources into mobile service growth. By the end of 2010, government projections indicate that fixed telephony penetration rates in Iran will be close to the 36 million fixed-line user benchmark projected in the Fourth FYDP.

Expansion in these smaller markets is attributable to a 1994 MCIT initiative to increase fixed-telephony investment during the government's First FYDP. From 1989 to 1994, Iran saw the number of fixed-line phones increase from 2.38 million to 5.5 million. By the end of the Second FYDP in 1999, the number had risen to 9.5 million fixed lines and by 2006 the number had reached 21 million. Currently, analysts estimate that by the end of 2010, penetration rates will be around 35.8%, or around 26 million fixed-lines in service.

Dr. Davood Zareian, Public Relations Director of TCI, told TBY, “There is room to increase the amount of fixed-line subscribers by 5 million through proper advertising, promotion, and marketing." Regional fixed-line operators are taking on more prominence in rural fixed-line teledensity rates after a 2007 report by MCIT prompted a more rigorous privatization effort by TCI.

TCI granted licenses to five regional fixed-line operators, but it still remains the sole operator of the national fixed telephony network and through the Telecommunications Infrastructure Company (TIC) established in 2003, is responsible for the physical development of the network of copper cables and wires to subscribers—a distribution of frames and posts that in 2010 is “worth billions of dollars." Dr. Zareian said that TCI is looking to expand its foreign fixed-line investment opportunities, and can provide other countries with “technical, engineering and value-added services for fixed-line and mobile phone operators."


According to market analysis, Iran's mobile phone market is one of the most attractive in the Middle East region. Although rapid growth in mobile phone services has also advanced with other regional competitors, there are several factors that contribute to increased investor interest in Iran's mobile phone market. Key among them is the fact that an estimated 56% of Iran's 70 million people are under the age of 25, with the majority in the vital 17-24 year age group that is most susceptible to new trends in the mobile phone market. This bodes well for Iran's planned venture into third generation (3G) mobile phone services.

Based on 4Q 2010 estimates, there are 62.4 million mobile phone subscribers representing an 83% penetration rate in Iran. This represents a remarkable 663% increase on the 9.5 million mobile phone subscribers in 2006. Because of the large youth population in Iran, TCI projects that it can increase its mobile penetration rates by another 20 million subscribers by 2014.

Most of this growth is attributable to competition introduced after MCIT's 2003 privatization efforts. In 2006, South Africa-based MTN Group's Iranian brand MTN Irancell commenced operations, and by 2007 had captured one-third of Iran's total subscriber base (ICI/IDRC). MTN owns 49% of MTN Irancell and until 2008 had exclusive rights to market the private GSM sector in Iran. MTN Irancell increased its market share to 40% nationwide in 2009, and in the first six months of 2010 had increased its subscriber base by 16% to 27 million subscribers due to appealing seasonal usage promotions.

Currently there are four mobile phone operators in Iran: TCI's mobile brand name MCI (Mobile Company of Iran), and MTN Irancell (MTN Group) are the only national operators, the Mobile Telecommunications Company of Esfahan (MTCE) operates solely within Esfahan province (12 cities), and the fourth mobile phone operator is Tehran-based Taliya, managed by Millicom International Cellular from Luxembourg.

Both national operators TCI/MCI and MTN Irancell offer GPRS-based services, and all four carriers have expanded their prepaid SIM card services introduced in Esfahan in 2002 and later in Tehran (2005) through an agreement between Taliya's parent company, the Rafsanjan Industrial Complex in Tehran, and TCI. Although TCI controls around 70% of the mobile phone market share, for the last four years it has adjusted its post-paid entry prices and made it easier to buy prepaid SIM cards to compete with the prepaid SIM card services offered by MTN Irancell and Taliya.

TCI puts its current average revenue per user (ARPU) at around IR110,000 ($10.28), which TCI plans to double by providing value-added services. Whereas, MTN Irancell's ARPU remained at IR82,895 ($8).

A fourth mobile phone operator—Tamin Telecom—is due to enter the market at the end of 2010. Tamin is the telecommunications investment arm of Iran's Social Security Investment Company (SSIC) and in April 2010 it secured the third national mobile phone operator license and a two-year contract as Iran's exclusive 3G service provider. Analysts project this will spurn significant network expansion growth, particularly because Tamin's 3G network is likely to attract a sizeable new consumer base from Iran's 17-24 age group, while Tamin's competitors will look to promote their services further ahead of Tamin Telecom's entry.

As for investor confidence in Iran's mobile phone sector, Etisilat may be repositioning itself to enter the market after Malaysia's Axiata Group announced in 2010 that it would be off-loading its Iranian stake in MTCE. Etisilat had previously attempted to secure a two-year deal to be the exclusive 3G operators in Iran, but in May 2009 the Abu Dhabi-based operator had its mobile license withheld. Despite this setback, industry sources say that the UAE telecoms giant has shown commitment to developing the Iranian telecoms market and perceives Iran as a great investment opportunity.


The internet is increasingly becoming a factor in the daily lives of Iranians, particularly with the key 17-24 age segment. Although Iran was the second country in the region to establish internet connectivity in 1993, the internet sector is still only now beginning to enter a growth phase. TCI estimates by the end of 2010 there will be more than 27 million internet users, but Internet World Statistics puts the total number or users at around 33.2 million, representing some 43.2% of the population. This represents an increase of more than 30 million users since 2000.

Iran's e-commerce sector has continued to expand. In 2007, VISA and MasterCard services were made available online and for e-card terminals at a wide-variety of sale points. Saman Bank has been at the forefront of online banking services in Iran since it introduced online banking through the Shetab (Interbank Information Transfer Network) system in 2002. It has become the backbone for the Iranian banking system in order to handle ATM transactions and point-of-sale card based transactions. In 2010, it is estimated that 12 million cards would be issued on the Shetab system. As well, the Central Bank of Iran has continued to reach electronic banking agreements with other countries in the region and in Asia, including agreements with China in 2005 and direct access links to Iranian accounts from ATMs in Bahrain, Qatar, and Kuwait in 2008.

The turning point for the magnitude of Iran's e-commerce and e-government projects was in 2007 when Iran introduced the Fuel Smart Card Project (FSCP)—the country's largest ICT project to date. The FSCP is an electronic gasoline rationing system that has seen around 17 million point-of-sale “smart" cards distributed nationwide. Touted as a means of curbing black-market gasoline sales, the FSCP is widely considered an ICT success story. The Managing Director of the National Iranian Oil Distribution Company (NIODC), Farid Ameri, said in July 2010 that Iran had saved $11 billion in the three years since the program was implemented.

Meanwhile, Iran has continued to develop the two major internet connectivity networks —the public switched telephone network (PSTN) and the public data network. The PSTN is the primary provider for end-users to the countries internet service providers (ISPs), and the leading ISP, the Data Communication Company of Iran (DCI) belongs to TCI. DCI is responsible for maintaining the network infrastructure, and for providing internet access through most of Iran's major cities. The number of ISPs has grown from 750 in 2007 to more than 1,300 in 2010—all are privately owned companies.

Bandwidth is increasingly an issue for Iran's ICT sector. ISPs rely on TCI for their bandwidth needs, and over the last two years a government initiative has increased modern data line capacities through a national IP-based network. Broadband development is moving forward because of the development of a “national data network" by a TCI subsidiary, the Information Technology Company (ITC). By the end of 2010, ITC's network will include more than 60,000 high-speed ports covering 210 Iranian cities, and over the next five years, ITC will build infrastructure to optimize Iran's broadband capabilities in order to present other value-added services including offering licenses for WiMAX services to private companies via auction.


Looking to the future, TCI plans to expand its business opportunities beyond Iran's borders as it increases cooperation with more international telecom operators inside and outside the country. As well, the TIC launched eight national and international projects in November “to turn the country into the telecommunication hub in the region", all in an effort to increase international connection services in Iran. According to the Director General of TIC, Mohammad-Baqer Zohourifar, this includes launching an optical fiber channel and a submarine communications cable in the Persian Gulf with follow up projects focused on connecting Iran with various global optical fiber networks “to avoid any setbacks in the international telecommunications system". Currently, about 33 Iranian cities are connected directly to the Trans-Asia-Europe cable network (connecting Europe to China), and with the planned launch of six new telecommunications satellites in the first half of 2011, Iran's telecoms sector will likely be competitive internationally for years to come.