MTN`s long-awaited commercial launch in Iran is scheduled for next month.
CEO Phuthuma Nhleko told analysts and media, at the company`s interim results presentation yesterday, that Iran would be one of MTN`s big drivers going forward.
MTN, which aims to establish Iranian operations in mid- to end-September, hopes to add a million subscribers to its base through this venture. It has already embarked on a soft launch with 5 000 test SIM cards in issue.
The first test calls were made on 24 August and the key Tehran switch is operational, while three other switches are nearing conclusion. On the transmission side, three switches have been connected, and Nokia, Huawei, Alcatel and Ericsson have been appointed as network vendors.
Some 600 operational base stations have been targeted by the end of the year and the company also aims to have seven switches operational in short order.
Nhleko also said interconnect agreements were under final negotiation with the major players. The company has already seen setbacks, as the date for licence roll-out obligations was moved to 10 July, as there was a delay in obtaining clean spectrum.
However, MTN is confident it has sufficient spectrum available and will not have to spend on acquiring additional spectrum.
MTN has 260 local staff members and 105 foreign nationals on the ground and the call centre is already operational. Retail outlets are already under construction.
Challenges ahead
The company, however, does not expect all to be plain sailing in Iran, as Nhleko said there were challenges such as local content requirements and regulatory effects. An analyst, who spoke on condition of anonymity, believes MTN had overrated the market. While not too concerned with the political risk, he is concerned about the revenue-sharing agreement.
MTN has a 28% revenue-sharing agreement in place with the Iranian government, which the analyst suggests could make the investment economically unviable. However, he does see the country offering good growth potential, as a starter pack in Iran is about $160, indicating pent-up demand. As such, MTN`s projection of adding a million subscribers to its base by year-end is "not unrealistic".
Another analyst - who also asked not to be named - suggests the investment would prove to be worthwhile in the longer term. He is unconcerned about the delay in getting operations off the ground, saying this is typical in the industry.
While riskier than other countries, he notes the revenue-sharing agreement means government shares some of the risk. It was also the reason behind the licence costing 300 million euros, instead of the usual $2 billion.
In addition, he says a market characterised by bad service would welcome a new entrant and competition.
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