Mobile growth slows in Iran as penetration reaches saturation point

Iran's mobile market, by far the largest segment of the country's telecoms industry, exhibited considerably slower growth in 2011 compared with previous years, according to BMI. This reflects the market's maturity, with the penetration rate just shy of 100% at the end of the year.

The country's second largest mobile operator, MTN Irancell, is still the only company to give any indication of how the market is progressing. The company's latest operational data for Q311 was stronger than Q211, but growth rates were still weak overall.

It is inevitable that Iran's mobile market would slow, as major cities approach saturation and growth prospects are more limited to rural areas that are harder to reach and offer more limited revenue. Iran’s mobile sector is expected to grow by over 8% in 2012, with the mobile customer base forecast to grow to 80.85mn by the end of the year. The mobile market will likely cross the 100% penetration threshold in early 2012, adding only 5pps to the penetration rate in the year.

Nevertheless, it should be remembered that the bulk of mobile subscriptions in Iran are made up of prepaid users. Many of these are understood to be inactive and this means actual penetration rates are almost certainly much lower than the forecast suggests, meaning that growth will likely continue.

MTN offers data on ARPU in Iran, showing that subscribers spend an average of US$8 a month. While this is a respectable amount for an emerging market, regional peers see higher revenues from their subscribers. Dollar ARPUs fell in 2011 for MTN, although these increased in local currency terms. The increase occurred in spite of the promotions which the operator introduced in a bid to capture market share from mobile market leader MCI. This suggests ARPU growth was driven by other factors, including an increase in the general level of service usage and a trend towards the use of more lucrative data services. In 2011 we estimate that MTN's average blended ARPU grew by 2.4% in local currency terms to IRR82, 434. This is despite reports that MTN's ARPU slipped to US$7.9 in 2011.

Iran's fixed-line telephony and internet sectors are unlikely to undergo significant change, with fixed-line telephony expected to achieve average annual growth of 1.9% in the five years to 2016. This equates to just under 30.5mn fixed lines in service by the end of 2016, with a penetration rate of nearly 39%.

Meanwhile, Iran had an estimated 27.34mn internet users at the end of 2011, a penetration rate of almost 37%. Despite strong internet usage growth in recent years, there are signs a major slowdown in growth is under way. This could suggest that the limit of the country's addressable market of potential internet users is already being reached.

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