The Ministry of Information and Communication Technology announced that the number of cell-phone subscribers in Iran will amount to 15.5 million by the end of the current Iranian calendar year (ends March 20, 2007). This total figure will include 13.5 million subscribers of the first state-run operator, one million subscriptions handed out by the Talia operator, and 1.5 million subscriptions to be handed out by the second cell-phone operator. The increased number of cell-phone users has made "cell-phone services" a major concern for the related authorities and the government has had to undertake temporary measures in order to improve situation of cell-phone services.

There has been a flurry of activity within the market in the past year. Late last year, the government decided to increase import tariffs on cell-phone sets from 4 percent to 60 percent in order to provide domestic cell-phone manufacturers with an upper hand. That decision, ratified in a meeting of the Economy Council presided over by President Mahmoud Ahmadinejad, paved the way for domestic producers to manufacture 6 million cell-phones. Afterwards, a consortium comprising of six cell-phone manufacturers, mostly state-run, was established and was charged with procuring necessary equipment through domestic manufacturers and according to existing international standards. The consortium comprises of ITMC (30 percent of which is owned by Iran Telecommunications Company), ITI SAIRAN (belonging to Ministry of Defense), Shiraz Electronic Industries Company (private), and Electronic and Microwave Company (private). The consortium met with President Ahmadinejad in early fall and signed an agreement with the Mobile Communications Company as clients.

The contract is worth 168 billion tomans, equal to about 200 million dollars. The consortium is expected to produce six million cell-phone sets along with all the necessary equipment such as BTS, macro-wave, indoor, and outdoor aerials at 900 and 1,800 MHz frequencies, OMC, TRAU, BST, equipment related to GTRH/BEGE, radio equipment and everything that is needed according to LOM. According to the contract signed between the consortium and the Mobile Communications Company, the guarantee of products will cover 18 months after delivery of equipment or one year after all equipment is installed at required sites.

The agreement drew criticism after it was ratified from various segments. From the Majlis Industries and Mines Commission to the Ministry of Ministry of Information and Communication Technology, concerns were raised about lack of information regarding the contract. Earlier in the year, the Ministry of Industries and Mines, in conjunction with the Ministry of Information and Communication Technology ordered Emad Semiconductor Company, Soroush Rasaneh, and ITMC to produce 6 million cell-phones. This announcement was then followed by the proposal to increase tariffs on cell-phones from 4 percent to 60 percent in order to support domestic production. The said companies were asked to find a foreign partner for producing 6 million cell-phone sets. Today, after nine months, they have failed to conclude a contract with a foreign company.

President Ahmadinejad has also said that the government will strongly support the contract for producing cell-phone equipment. The President’s support for the agreement will pave the way for the establishment of new consortiums. This may lead to problems such as the involvement of state-run companies in producing mobile phone parts.

Mohammad Soleimani, Minister of Information and Communications Technology

Mohammad Soleimani, Minister of Information and Communications Technology, whose ministry is in charge of the contract, has claimed that the installed facilities for rendering services to customers enjoy the highest technology and that his ministry aims to support domestic production. Some analysts believe that the ministry is the main beneficiary of the contract since two of the companies within the consortium are subsidiaries of the ministry. Moreover, purchases must also be carried out through the ministry. The manufactured products can be sold to Irancell and Talia operators.

Alireza Tahmasebi, Minister of Industries and Mines

Another party to the contract is Alireza Tahmasebi, Minister of Industries and Mines since one of the consortium’s companies belongs to his ministry. The ministry is also considering long-term plans for cell-phone production and has taken steps in recent months towards manufacturing cell-phone sets and equipment. Tahmasebi has repeatedly mentioned that the import of cell-phone equipment in the previous years is regrettable and he has set about to change this trend. The minister has also pointed out that during the coming year nearly $1 billion worth of cell-phones will enter the country which is equivalent to 50,000 new jobs. Thus, it is imperative for the ministry to support domestic production. Yet, none of these plans have been implemented thus far.

According to official statistics, during the first two months of the current Iranian calendar year (started March 21, 2006), imports of cell-phone sets, despite a 56-percent rise in tariffs, have doubled compared to the corresponding period last year. Meaning that in the first two months of this year nearly $64 million worth of cell-phones had been imported, compared to $33 million worth in the same period last year. Most imported cell-phones came from Finland, Germany, South Korea, Hong Kong, and China.

Mohammad Ebrahim Mottale’, managing director of Iran Telecommunication Manufacturing Company (ITMC), which is a major member of the consortium, says, "Good potentials have been created for production of cell-phone equipment. Therefore, the ability of major companies for producing telecommunication equipment has been increased." He also elaborated that the government has established the mentioned consortium after many sessions and to has taken into account most of the domestic capabilities in the field. Mottale’ went on to say that the consortium aims to reduce foreign dependence in cell-phone manufacturing, and that, "we must be ready to maintain cell-phone sites in the long run."

While the final contract between the consortium and the Mobile Communications Company has not yet been concluded, the managing director of ITMC claims that Iran is planning to sell cell-phone equipment to neighboring countries as of next year. He said the main reason for the establishment of the consortium was a diversity of producers and the existence of winners in telecommunications tender bids. He believes that after concluding the final contract, seven provinces will be chosen for the installation of domestically-produced equipment. Afterward, that equipment will be transferred to other parts of the country.

This has not prevented some authorities to object to the establishment of the consortium. Ramezanali Sadeqzadeh, chairman of the Telecommunications Committee of the Majlis’ Industries and Mines Commission, says that the commission is opposed to the establishment of the consortium. "We are not opposed to boosting domestic capabilities, but the agreement does nothing to strengthen those capabilities; rather, it harms them." Sadeqzadeh outlined nine factors for his argument that will be discussed in a meeting between officials from the Ministry of Industries and Mines, the Ministry of Information and Communications Technology and the Majlis Industries and Mines Commission.

The Representative of Rasht at the Islamic Consultative Assembly has enumerated the nine objections as such: "According to the first reason and in line with paragraphs A, B, and C, of Article 44 of the Constitution and the content of the 20-Year Perspective Plan, state-run companies cannot embark on activities that are specific to the private sector. For example, Mobile Communications Company, which is state-controlled, should be transferred to the private sector through the Tehran Stock Exchange since both Talia and the second operator have entered the scene. According to Article 124 of the Third Economic Development Plan, such state-run companies cannot embark on new investment. The second reason pertains to the method chosen to give up tender bid. The consortium has been formed through a permit issued by the Economy Council while a contract worth 200 million dollars should have been concluded through tender bid."

The MP said the third reason for Majlis’ opposition to the agreement was the governmental nature of the consortium. He said SAIRAN, Shiraz Electronic Industries Company, ITMC, and ITI companies are state-run and the consortium is incompatible with the goals of Article 44 of Constitution as well as the 20-Year Perspective Plan.

The fourth reason for the opposition of the Industries and Mines Commission to the agreement is the involvement of ITMC. Sadeqzadeh says, "ITMC has also become a member of another consortium for production of cell-phone in the spring and has not taken positive steps in this regard and, therefore, cannot be a member to another similar consortium."

The head of the Majlis commission also said another reason MPs opposed the consortium was th presence of SAIRAN in most telecommunications agreements. Pointing out this issue he said, "This shows that the Ministry of Information and Communication Technology favors this company. Many companies have protested to this discriminatory approach and the Ministry of Information and Telecommunication Technology should answer their objections."

The Representative from Rasht also mentioned the high investment needed and the state-run nature of the Mobile Communications Company as other factors driving Majlis opposition. He said that after correspondence in late 1383 (2004-05) and early 1384 between the Iran Privatization Organization and the Ministry of Information and Communication Technology, 35 percent of the stocks of Mobile Communications Company was to be transferred through the Tehran Stock Exchange. The obligations of the ministry according to the privatization plan were aborted after the coming to office of the current minister, Mohammad Soleimani. Sadeqzadeh says, "Soleimani aborted the plan and wrote that it was not expedient under current conditions."

Moreover, the Mobile Communications Company lacks a permit from Radio Regulations Organization. As pointed out by the MP, "Operators that started to work after the first operator, have obtained permits from Radio Regulations Organization, but the first operator considers itself an exception due to its state-run nature. Therefore, the Radio Regulations Organization has not been able to supervise tariffs set by the Mobile Communications Company. Although nobody has thus far objected to this, but new operators are sure to protest to the said inequality."

Ramezanali Sadeqzadeh, chairman of Telecommunications Committee of Majlis Industries and Mines Commission, maintains that the consortium will not get directly involved in the project in line with the signed agreement. Six members of consortium can employ sub-contractors to do the job. Therefore, existence of contractors, as brokers, will not be necessary in the final contract and is not economically feasible. "This will also prolong production and reduce quality," he added.

Another question that was not answered by either of the two ministries’ officials related to the assessment of technical abilities of consortium members. Rumors have it that some members of the consortium are still grappling with financial problems since due to low quality of their products during past years, most needed equipment for cell-phones was imported. On the other hand, experts maintain that due to rapid advances in cell-phone technology, any domestic investment in the field will not be economically feasible. Past experience of SAIRAN with regard to manufacturing cell-phones was a good example in this regard.