Vodafone has agreed a partnership with Iranian Internet firm HiWEB to help modernize its network, the companies said on Tuesday, making the British company the latest Western firm to enter Iran after sanctions were lifted.
Vodafone, the world’s second largest carrier by subscribers after China Mobile Ltd., said the agreement to help modernize HiWEB's network and IT infrastructure would also benefit its multinational corporate clients when they travel to Iran.
Many European companies have sought to capitalize on the opening up of the region's second largest economy since US sanctions were lifted on Jan. 16 after Iran agreed to curtail its atomic energy program, Reuters reported.
With a young population and high levels of mobile ownership, Iran is seen as an opportunity for telecoms companies seeking to expand into frontier markets.
"Vodafone's corporate customers will get the benefit of quality network services in the country and HiWEB will be able to access Vodafone's global expertise," Vodafone Partner Markets Chief Executive Diego Massidda said in a statement on Tuesday.
While Iran has a higher mobile-phone penetration rate than the US or Germany, its mobile data consumption lags, underlining a well of opportunity for investment in mobile Internet services as the country catches up.
Vodafone's French rival Orange (ORAN.PA) said at the end of August it was in talks with the Mobile Telecommunication Company of Iran, the country's largest mobile operator.
Orange, France’s largest telecommunications company, already has a technical-assistance contract with the Iranian company, The Wall Street Journal said.
“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,” a Vodafone spokesman said.
Privatized in 2009, HiWEB got a nationwide license to supply mobile Internet services in 2014 and has won a government contract to provide high-speed Internet exclusively to 25,000 villages across the country for a decade.
It is also looking to expand its mobile and fixed services in cities with a focus on business clients.
More foreign companies coming in
Other British companies entering Iran include British Airways, which resumed direct flights to Tehran in September, and BP (BP.L) which was reported to have bought crude from the National Iranian Oil Company (NIOC) this month.
A host of foreign investors, including Boeing Co., Airbus Group SE, Peugeot-maker Groupe PSA and German industrial giant Siemens AG, have also signed deals in Iran since the lifting of sanctions in January.
Earlier this month, the US Treasury loosened restrictions on Iran’s ability to trade in the US dollar, and widened the pool of potential business partners in Iran for non-American investors. Washington ruled that non-American investors can partner with Iranian entities even if those entities are still on the US 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.
The Vodafone spokesman said “the recent lifting of restrictions on dollar trading is helpful” but the wider lifting of international sanctions in January “was the main driver”.
Vodafone said it would assist HiWEB in marketing, distribution and sales, including the provision of Internet of Things (IoT) services which involve enabling Internet connectivity for cars and other objects.
British employers' group the CBI welcomed the news, saying Britain needed to develop its export links more than ever following the June vote to leave the European Union.
"Businesses recognize there are emerging opportunities in Iran," the spokesman said. "As with other Persian Gulf states, Iran has a growing middle class and infrastructure, energy and educational projects in need of foreign investment."
Tuesday’s move by Vodafone is another significant vote of confidence. HiWEB began in 2003 as a subsidiary of Iran’s Ministry of Industry and Mine, according to its website.