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TBY talks to V. Sadoughi, CEO and Member of the Board of the Mobile Communications Company of Iran (MCI), on staying competitive, areas of investment, and key telecoms services.
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.
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 in the market for the people. One of the big concerns is which new technology we are going to choose and 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.
© The Business Year - July 2012