Iran strips UAE group of mobile licence

A consortium, in which Etisalat has a 49 per cent stake, has lost the licence to operate Iran's third mobile network.

One of the UAE's largest investments into Iran has been thrown into jeopardy after officials there said Etisalat had been stripped of its US$300 million (Dh1.1 billion) licence to operate the country's third mobile network. After being formally announced in January as the winner of the licence, Etisalat said it would invest up to $5bn rolling out Iran's first high-speed 3G mobile network. But these plans appeared to be on hold yesterday when Iranian officials were quoted in local media as saying the Tameen Telecom consortium, led by Etisalat, had been stripped of its licence for failing to meet its payment terms. Mohammad Reza Farnaqi, a spokesman for Iran's Communications Regulatory Authority (CRA), was quoted by Iran's official Irna news agency as saying that Zain, the Kuwaiti operator that was the runner-up in the original round of bidding, would now take over the contract. The move was reminiscent of events surrounding the awarding of Iran's second mobile licence, which was originally won by Turkey's Turkcell, but later cancelled and re-awarded to MTN of South Africa. The news comes just months before Etisalat had planned to launch its services. Jamal al Jarwan, the head of Etisalat's international unit, said in January that the company would launch its service in Iran in six to nine months. It is unclear how much investment the company has already put into infrastructure and operations in Iran. Etisalat officials declined requests for comment, but the company said in a statement that it had received notification from the CRA that it was no longer the winner of the licence. Etisalat said it "will carefully review its options and will revert back to the CRA in due course with a formal response". A Zain spokesman said the company was in discussions with the Iranian authorities, but could not provide details on the negotiations. While Zain had also agreed to the $300m licence fee in its original bid, Etisalat outbid the Kuwaiti firm in its business plan, which gave a larger royalty of 23.6 per cent of revenues to the government. It is unclear if the Iranian authorities are asking Zain to commit to a similar royalty. Last week, Zain announced a major cost-cutting initiative, saying that streamlining its businesses, rationalising costs and outsourcing staff to third-party contractors would become its priority during the global economic downturn. When Iran's third mobile licence was originally awarded, Etisalat management hailed the deal as a sign of the deep business and social relations between Iran and the UAE, its largest trading partner. But the development yesterday was not the first case of a UAE company's Iranian dealings turning sour. Crescent Petroleum, based in Sharjah, invested an estimated $1bn building a pipeline connecting the Emirates with an Iranian offshore gasfield. But the facility sits unused as the Iranian government attempts to negotiate a higher price for the gas than originally agreed in 2005, and Iran's national oil company drags its feet on commissioning gas production facilities. Tehran has repeatedly said it would use the gas domestically if Crescent does not meet its price demands, while Crescent has said it has a binding contract, and the dispute may have to be settled in international court. The Etisalat licence withdrawal is also not the first time a foreign telecommunications company has been stripped of its rights to operate in Iran after being awarded a licence. In 2004, Turkcell signed a $370m deal to operate Iran's second mobile network. After Iran's parliament voted to prevent a foreign company from owning the network, Turkcell reduced its stake in the venture to 49 per cent. Soon after, Turkcell was ejected from the country after the government said it had failed to meet its contractual obligations. The events caused significant diplomatic strains between Turkey and Iran. Etisalat also said yesterday it "is and has always been committed to the development of the Iranian telecom market and perceives Iran as a great investment opportunity". [e-mail]