ANALYSIS: Lifted sanctions in Iran pave way for ICT investment

27 August 2015 |


After a 12-year stand-o between the Islamic Republic and the so-called “six world powers” (the US, China, Russia, Germany, France and the UK), an agreement has been reached which could lead to huge investment in Iran’s telecoms market.

Having engaged in 18 days of talks, Iran has agreed to curtail its nuclear programme for more than a decade, in exchange for the US and EU lifting a number of crippling sanctions.

The Joint Comprehensive Plan of Action (JCPOA) includes conditions on both sides. Iran has been given a stringent list of actions to carry out regarding its nuclear activity, including keeping its level of uranium enrichment at up to 3.67% for the next 15 years.

The US and the EU have, in return, agreed to terminate sanctions relating to activities in finance, banking, insurance, oil and petrochemicals and investments, as well as transactions in automotive, commercial passenger aircrafts, shipping and shipbuilding, transport and gold and other precious metals.

A statement from investment banking group Silk Road Capital described the deal as a “game-changer” for the country, and added that it “brings Iran back from decades-long isolation”.

Analyst firm Budde stated that Iran’s telecoms sector presented a range of opportunities in 2015, but noted that many foreign companies were reluctant to invest in the market due to the sanctions placed against it, as well as a number of political and economic risks.

Current penetration levels indicate room for continued revenue growth. Mobile data services are available but account for a small proportion of total revenue, a report from Budde said.

It added that this is expected to increase over time as mobile data services increasingly underpin future revenue growth, made possible by the launch of 3G/HSPA services.

But with these sanctions lifted, market watchers now expect a surge of foreign investment in this potentially lucrative market. 

The “Iran Telecommunications Report” published in August 2015 by BMI Research said that as a result of the nuclear agreement, it has revised its economic growth forecast for the country, projecting real GDP growth to pick up from 0.6% in 2015, to 2.9% in 2016 and 3.6% in 2017.

"This is also likely to have a positive effect on the mobile market and potentially attract more foreign investment,” the report continued.

BMI also sees scope for notable growth in data services, estimating these services to grow at an average rate of 36.2% CAGR over the next five years.

“We estimate there were around 9.9 million 3G subscribers at the end of 2014 and forecast a  gure of 18.9 million at the end of 2015. We expect the rapid growth to continue over the short term as more operators launch advanced services,” BMI’s report stated.

MTN Group, which had previously been restricted from taking money out of its Iranian subsidiary, added that the lifted sanctions would enable it to repay approximately $1 billion in accumulated dividends and loans.