Vodafone Leaps Into Iran With Internet-Service Deal

PLC intends to work with an Iranian internet-service provider to help improve its local networks, becoming the first big Western firm to jump into Iran after the U.S. moved earlier this month to make it easier for companies to do business in the Islamic Republic.

Vodafone didn’t disclose details, including any planned investment in the venture. It said that it wouldn’t take an equity stake in the project.

Vodafone isn’t the first—or even the biggest—Western company to enter Iran after world powers started lifting global sanctions earlier this year, following Iran’s agreement to curb its nuclear program. But the move comes just a little over a week after the U.S. moved to ease regulatory hurdles that have kept many Western companies at bay.

Earlier this month, the U.S. Treasury loosened restrictions on Iran’s ability to trade in the U.S. dollar, and widened the pool of potential business partners in Iran for non-American investors.

Washington ruled that non-American investors can become partners with Iranian entities even if those entities are still on the U.S. sanctions list, as long as the entities weren’t controlling shareholders in any new venture.

That opens the door for a host of fresh deal making.

Many big companies have worried about accidentally running afoul of existing U.S. sanctions amid a lack of transparency in Iran’s business community and its state-dominated economy. Iran’s Revolutionary Guard Corps, a paramilitary organization still under U.S. sanctions, for instance, holds controlling and noncontrolling stakes in many of Iran’s biggest businesses.

A spokesman for Vodafone said “the recent lifting of restrictions on dollar trading is helpful” but the wider lifting of international sanctions in January “was the main driver.”

Iran has a relatively youthful population of 80 million, making it an attractive market for many Western goods and services. A host of foreign investors, including Boeing Co. , Airbus Group SE, Peugeot-maker Groupe PSA and German industrial company Siemens AG , have signed deals in Iran since the lifting of sanctions in January.

Tuesday’s move by Vodafone, the world’s second-largest carrier by subscribers, after China Mobile Ltd. , is another significant vote of confidence. HiWEB began in 2003 as a subsidiary of Iran’s Ministry of Industries and Mines, according to its website. The government privatized it in 2009, and it underwent an overhaul the following year. Despite its long history, the company only got a license to provide mobile data in 2014 and fixed-line services last year. A spokesman for Vodafone said HiWEB is a private business 100%-owned by the Miri family.

Iran’s telecom landscape has already attracted foreign interest. Broadband services in Iran have grown quickly in recent years despite hefty government censorship of the internet. Popular sites including Twitter, Facebook and YouTube are all blocked. Still, fixed broadband penetration is starting to take off: The share of internet users jumped from 19% in 2011 to 39% in 2014, according to a recent report by consultants McKinsey & Co.

While Iran has a higher mobile-phone penetration rate than the U.S. or Germany, its mobile data consumption per person lags behind that of comparable countries, underlining a well of opportunity for investment in mobile internet services as the nation catches up.

The Wall Street Journal reported in August that France’s largest telecom company, Orange SA, was in preliminary talks to buy a piece of Iran’s biggest telecom company. Orange already has a technical-assistance contract with the Iranian company.

“All operators around the world are looking for a form of cooperation with Iran,” said Bruno Mettling, Orange’s deputy chief executive for the Middle East and Africa, in an interview in London in July.

The agreement with HiWEB fits into Vodafone’s strategy of focusing on fast-growing emerging markets, which also include India, Turkey and South Africa.

“It enables us to have on the ground a partner that can serve our multinational corporate clients,” the Vodafone spokesman said.

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http://www.wsj.com/articles/calling-tehran-vodafone-leaps-into-iran-with-internet-service-deal-1476782936