France's Orange declares interest in buying into Iran's largest mobile network

France's Orange declares interest in buying into Iran's largest mobile network
MCI has more than 50mn subscribers with contract SIMs.
By bne IntelliNews September 5, 2016

In what is probably the worst kept secret in Iran’s telecoms industry, on August 31 France’s Orange confirmed what mobile network insiders have been saying for more than a year, that the Paris-based company is interested in buying into the Islamic Republic’s largest cellular telecoms provider, Mobile Communications Company of Iran (MCI).

Such an investment would give Orange a head start into this previously disconnected market of 70mn plus people. MCI or Hamrahe Aval (the First Network as it is locally known) is the largest mobile company in Iran with more than 50mn subscribers on contract SIMs and over 17mn prepaid cards, covering over 1,200 municipalities across Iran. 

Orange, formally France Telecom, made a statement of its intentions to the Wall Street Journal,  saying that there were a number of areas of potential cooperation and business topics that the two sides could work on.

In a company statement, the Paris-based operator said: "Like many other international operators, Orange has been considering opportunities in the Iranian market subsequent to the implementation of the JCPOA." The JCPOA or Joint Comprehensive Plan of Action is the so-called nuclear deal struck between Iran and six world powers which allow certain business to be conducted by non-US entities with Iran but still limits access to US-based companies.

"We are conducting feasibility studies to understand and assess what is possible in this complex environment, particularly with regards to certain economic sanctions that continue to apply to Iran," Orange said in a statement.

"We anticipate that these discussions will be concluded within a few months," a spokesman said in a statement sent to Reuters on August 31. The company statement did not elaborate on what those areas of cooperation could be, or how much of a stake the Iranian government would allow to be sold off. 

Orange could help MCI with customer retention in a market which now allows number porting and where there is increasing competition and over saturation.

The confirmation by the French company follows comments previously made by Iran’s minister of communications, Mahmoud Vaezi, who said he was in talks with the company in September 2015, following the state visit by Iran's president Hassan Rouhani to France that year. Some 90% of MCI is owned by government entities.

Opposition to proposed deal

However, Orange has apparently come up against increasingly hostile opposition from some quarters, including the continuing sanctions monitoring regime of the US’ Office of Foreign Assets Control (OFAC), which is said to be still muddying the waters for foreign businesses entering the Iranian market.

Knowing the complexity of such red tape, Orange – which is listed on the New York Stock Exchange – has been readying itself and its lawyers on both sides of the Atlantic for entry into the Iranian market.

The proposed MCI-Orange deal is further complicated by the ownership of Orange itself, with the French government still retaining a 23% share of the company. France, one of the five members of the P5+1 group of countries which negotiated with Iran on the nuclear deal, and at points was blamed for the near complete failure of the deal after having supposedly taken Israel’s and Saudi Arabia’s complaints into consideration. But the government is now pushing to get its operator into the Iranian market

Coincidentally, Orange also pulled out of a joint venture in Israel in 2015, with some saying at the time it saw much bigger opportunities in countries such as Iran than a small market like Israel which would end up with the French group blacklisted from all neighbouring Arab states.

A local telecom, which wished not to be named, welcomed the deal: “Any progress with foreign companies entering the mobile telecoms market, with or without their government’s backing is a good precedent for Iran which has been suffering from a lack of dynamism in the market in recent years.”