Iran's mobile economy lags in MENA

The Iranian mobile economy status – 2018
Nima Torabi

Status quo.
Iran’s mobile user penetration rate is highly progressive
1. Includes: Djibuti, Jordan, Iraq, Lebanon, Palestine, Syria, Sudan, Yemen
Source(s): GSMA; Deloitte; Cisco; BMI Research; Operator data; Capital IQ; Delta Partners; Economist; Various publications
78% 76%
67% 63%
46%
Iran GCC
states
North
Africa
Turkey Other Arab
states
MENA unique mobile subscriber penetration rate breakdown by sub-regions, 2017
1
67%Global average
63%MENA average
2

69%
54%
40%
33%
24%
7%
9%
28% 45%
22%
24%
37% 33%
22%
54%
GCC states Turkey North Africa Iran Other Arab
states
Mobile Internet Voice Only Non-subscribers
Status quo.
Iran has the largest share (%) of voice-only users in MENA
1. Excludes all cellular IoT 2. Includes: Djibuti, Jordan, Iraq, Lebanon, Palestine, Syria, Sudan, Yemen
Q2 2017, MENA mobile connection type breakdown1
Population
(millions)
53 81 189 81 160
2
3

73%
59%
52%
44%
31%
4%
7% 17% 35%
18%
23%
34% 31%
21%
51%
GCC states Turkey North Africa Iran Other Arab
states
In a few years…
…and will remain as so till the end of the current decade
1. Excludes all cellular IoT 2. Includes: Djibuti, Jordan, Iraq, Lebanon, Palestine, Syria, Sudan, Yemen
2020 forecasts, MENA mobile connection type breakdown1
Population
(millions)
55 84 196 84 166
2
4

40.1%
47.9%
20.4%
17.2%
39.5%
34.9%
2017 2020
2.1%
CAGR%
0.5%
12.9%
33.0%
44.0%
45.0%
35.0%
22.0%
21.0%
2017 2020
Trends 2020
Iranian users will be quickly converting to mobile internet
1. Not including Iran 2. Excludes all cellular IoT
MENA1 mobile connection trends2
Population in millions
Iran mobile connection trends2
Population in millions
-0.3%
CAGR%
-6.9%
11.5%
485
584
81
84
+11%+8%
-10%
-3.2%
-4.6%
-1%
5

Trends 2020
…however this speed will not shift Iran’s position in MENA
1. Based on mobile internet penetration rates in 2020
Ranking1
Region / country 2017 2020 Δ 2017 2020 Δ 2017 2020 Δ
1
GCC
states
69% 73% 4% 7% 4% -3% 24% 23% -1%
2 Turkey 54% 59% 5% 9% 7% -2% 37% 34% -3%
3
North
Africa
40% 52% 12% 28% 17% -11% 33% 31% -2%
4 Iran 33% 44% 11% 45% 35% -10% 22% 21% -1%
5
Other Arab
states
24% 31% 7% 22% 18% -4% 54% 51% -3%
2017 – 2020 mobile connection type comparison, MENA
6

Trends 2020
…and the same repeats itself for technology adoption
1. Based on 4G connection penetration rates in 2020
2017 – 2020 mobile connection technology type comparison, MENA
4G 3G 2G
Ranking1 Region / country 2017 2020 Δ 2017 2020 Δ 2017 2020 Δ
1 Turkey 19% 42% 23% 34% 26% -8% 48% 32% -16%
2
GCC
states
21% 41% 20% 57% 48% -9% 22% 11% -11%
3 Iran 6% 18% 12% 39% 47% 8% 54% 34% -20%
4
North
Africa
3% 13% 10% 50% 60% 10% 47% 27% -20%
5
Other Arab
states
3% 11% 8% 31% 38% 7% 66% 51% -15%
7

Trends 2020
Despite progress, Iran’s SMP1 penetration will lag in MENA
1. Smartphone 2. Based on smartphone penetration rates in 2020
2017 – 2020 smartphone penetration comparison, MENA
2020 2017 Change
Ranking2 Region / country Pop. % penetration Pop. % penetration Pop. % penetration
1
GCC
states
42.8 78% 38.2 72% 4.6 6.0%
2 Turkey 62.0 74% 57.5 71% 4.5 3.0%
3
North
Africa
125.2 64% 77.5 41% 47.7 23.0%
4 Iran 49.6 59% 34.0 42% 15.6 17.0%
5
Other Arab
states
92.7 56% 57.6 36% 35.1 20.0%
8

Global overview
Overall, MENA is a laggard subscription penetration region
Mobile subscriber penetration rate based on unique users
66%
85% 84%
80%
67% 67%
62%
44%
71%
88% 86%
82%
74% 73%
68%
52%
Global Europe North
America
CIS LATAM APAC MENA Sub-saharan
Africa
2017 2025
Iran’s penetration rate stood at 78% in 2017
higher than the regional average
9

Global overview
…and in mobile internet penetration, the gaps even widens
Mobile internet penetration rate based on unique users
43%
72% 73%
52% 50%
41%
36%
21%
61%
82%
80%
72%
66%
63%
51%
40%
Global Europe North
America
CIS LATAM APAC MENA Sub-saharan
Africa
2017 2025
Iran’s penetration rate stood at 33% in 2017
lower than the regional average
10

Global overview
…and even further when it comes to technology type
Cumulative connectivity by technology ‘17 Cumulative connectivity by technology ‘25
13%
17%
17%
17%
26%
16%
6%
17%
8%
16%
10%
22%
18%
27%
18%
13%
1%
3%
14%
12%
8%
30%
50%
12%
Sub-saharan
Africa
MENA
APAC
LATAM
CIS
Europe
North
America
Global
2G 3G 4G 5G
2%
3%
3%
3%
2%
25%
19%
15%
15%
23%
2%
16%
18%
12%
26%
37%
44%
42%
38%
40%
32%
1%
3%
8%
5%
7%
39%
25%
9%
Sub-saharan
Africa
MENA
APAC
LATAM
CIS
North
America
Europe
Global
2G 3G 4G 5G
11

Gap analysis
Infrastructure is the main driver of Iran’s connectivity gap
1. Weighed score based on the four key enablers of mobile internet connectivity 2. MTN-Irancell reports 86% nationally
Factors behind Iran’s connectivity gap, connectivity index and its sub-scores 2017
Iran’s mobile
connectivity index1
51
Consumer
readiness
70
Content 51
Affordability 49
Infrastructure 40
 Infrastructure
− Low 2G-coverage by population that is below the 98%
coverage of example regional GCC states2
− Low 4G coverage
− Spectrum issues with lag in digital switchover to 700MHz
limiting affordability and upgrades to 5G networks
 Affordability
− At <$5 ARPU3 – one of the lowest globally – Iran’s operators
lag profits for further investments into infrastructure
 Content
− Although a smaller issue, only half of Iranians speak
Persian and more local language content can help further
bolster connectivity relevance to daily users
 Consumer readiness
− Iranians have high indicative scores such as education
levels, literacy rates, life expectancy, gender equality (e.g.
equal access to education) and not a major issue
1
2
3
4
12

ARPU1 issues
Low levels of ARPU1 in Iran is limiting MNO’s2 investments
1. Average revenue per user 2. Mobile network operator
Figures in USD, 2013 – 2016
MTN-Irancell average annual ARPU1 trends Example global ARPU rates
4.0
4.1
3.9
3.8
2013
2014
2015
2016
Figures in USD, Q4 2015
10.9
14.8
22.1
30.7
38.3
48.5
13

Contribution to global GDP, figures in billions of USD, % of total GDP, 2016
GDP share%
Mobile economy contributes to ~4.5% of the global GDP
1. Includes infrastructure providers (e.g. TIC), device manufacturers (e.g. Samsung, etc.), distributors and retailers (e.g. BestBuy, Paytakht
shopping center, etc.), content and application providers (VAS and startup partners)
665
360
430
1,865
3,320
Mobile network
operators
Related
industries1
Indirect Productivity Total impact
on GDP
0.9%
0.5%
0.6%
2.5%
4.5%
4,200
4.9%
2020
forecast
Operator ecosystem
14

Contribution to MENA GDP, figures in billions of USD, % of total MENA GDP, 2016
GDP share%
Mobile economy contributes to ~4.2% of MENA’s GDP
1. Includes infrastructure providers (e.g. TIC), device manufacturers (e.g. Samsung, etc.), distributors and retailers (e.g. BestBuy,
Paytakht shopping center), content and application providers (VAS and startup partners)
45
8
14
98
165
Mobile network
operators
Related
industries1
Indirect Productivity Total impact
on GDP
1.2%
0.2%
0.3%
2.5%
4.2%
194
4.3%
2020
forecast
Operator ecosystem
15

1.9
0.3
0.6
4.1
6.9
3.0
9.8
Contribution to Iranian GDP, figures in billions of USD, % of total GDP, 2016
GDP share%
Mobile economy only contributes to ~1.9% of Iran’s GDP
1. Based on National Sixth Development Plan (1396-1402); however without FDI seems highly unlikely
Operator ecosystem
Mobile network
operators
Related
industries
Indirect Productivity Total telecom
impact on GDP
IT sector Total ICT sector
impact on GDP
0.5%
0.1%
0.2%
1.1%
1.9%
0.8%
2.7%
***Rough estimation***: considering the regional average of
4.2% share of GDP, Iran’s mobile economy is missing out on
~$8.4B expanding the current available mobile economy market
size by ~122%...
14.6
2022 goal1
7.8
2022 goal1
Total available market
size for Iranian startups
16

Policies for a digitally advanced economy in the MENA region
Policies ahead
Policy makers must address 4 areas to address growth
1. Domestic and international
Digital
transformation
policies
Policymakers need to create competition and protect consumers and foster
societal progress. This will require an update to regulations so that they better
reflect today’s market conditions. By lifting burdens, policymakers can generate
a surge in the digital development of the economy and society
Data privacy /
cross-border1
movement of
information
Data privacy is fundamental to building consumer’s digital trust and combined
with the free movement of data, the digital economy can operate efficiently,
resulting in benefits from wider service choice, global service quality and
lower service prices
License
duration /
renewal
License expiry creates significant uncertainties for mobile operators, which has
the effect of stifling investment in network infrastructure and operations which
the country desperately needs. A coherent approach to license renewal is
needed to help operators make long-term investment decisions.
Reducing
costs of
doing business
Policy makers goal should be to maximize value for the society via licensing
fees that recover costs vs. additional revenues. Provisions to operators for the
coverage of spectrum costs and regulating more lax taxing systems that help
the proliferation of the digital economy can enable multitudes of future benefits
17

Case example: messaging apps
Operators
Platforms scales are monetizing via large network effects
1. Offline-to-Online 2. Application programming interfaces (APIs) allow software programs to “talk” to one another
1.1
1.9
2.8
3.6
2013
2014
2015
2016
Major messaging platforms: active users
Figures in billions
73%
47%
29%
The curious case of WeChat
Majority of aggressive scaling rendered via open APIs2
Typical services offered:
 Digital advertising / marketing analytics
 e-Commerce
 Digital content
 O2O1 services
 Finance
Q1 2016
 User Base: ~700M
 Revenues: $1.8B
Comparison: Whatsapp
with ~1B users made
only $49M
18

14.3
Figures in billions of USD, global, 2010 – 2015
Operators
In response, MNOs1 are investing in tech. companies
1. Mobile network operators
0.9 0.8 0.9
2.4
1.8
5.8
0.1 0.4 0.2
0.4
1.4
3.2
2010 2011 2012 2013 2014 2015
Developed markets Developing markets
9X
14.3
19

2017 records
Operators
Case example of a success: MTN and Rocket Internet JV1
1. Joint venture 2. Market guesstimates and rumors; no official voice from the company
14.3
Launch date:
Late 2014
Potential valuation2
~15,500 B-IRR
~$300M
Late 2017
3 years
DISCUSSION PURPOSES
20

Suggestive recommendation(s)
Operators
MNOs need to invest into VCs / later stage tech companies
1. Outsource decision making and risk analysis process and operational know-how
14.3
Early stage idea companies
 No revenues
 Operating losses
Start-up companies
 Small revenues
 Increasing losses
Late stage tech startups
 Growing revenues
 Profits visible
Direct investment
Venture capitalists1
Indirect investment
21

Suggestive recommendation(s)
Venture capital
VCs need to think global and partner up with operators
1. Sources indicate tech-startup have 0.5% of national GDP (~$1.8B) 2. Return on investment 3. Increased accessibility resulting in a
larger overall targetable market size 4. SMS
14.3
Cross border
expansion /
global mindset
 It has been ~5 years since the aggressive roll-out of the Iranian tech-startup
scene and most low hanging fruits have been picked while traditional cloned
business models are growing fragmented with small players. VCs need to
start enforcing internationally thought-oriented tech biz models that can cross
the domestic marketplace and penetrate regional markets
 The $3B IT domestic sector1 will only suffice for a short period of time for
entrepreneurs and VCs to tackle and RoI2 will be jeopardized if corporate
thinking does not expand businesses over to bigger total markets
Partnerships
with MNOs
 Operators have multitude of synergies to offer other than capital such as
distribution channels, marketing tools and analytics and consumer
insights that can bolster tech-startup growth and eventually bigger RoIs
 Sharing revenues and profits with MNOs further motivates their
investment into infrastructure in the longer3 term while reaping some of
the lost revenues to major OTT messaging platforms that have been hurting
traditional voice and messaging4 income streams
22

.
.
.
Revenues from VAS, content and applications provided by MNOs in millions of USD, 2016
Venture capital
The potentials in global expansion could be immense
14.3
42
1,000
7,184
Iran MENA CIS
.
24X
171X
DISCUSSION PURPOSES
23

Iran's mobile economy lags in MENA

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Iran's mobile economy lags in MENA

Similar to Iran's mobile economy lags in MENA (20)

Recently uploaded

Recently uploaded (7)

Iran's mobile economy lags in MENA