Samsung Electronics might win Iran’s ICT sector in the next two years. With the visit of the South Korean president to Iran in May and Iran’s ICT Minister visiting Samsung’s HQ last week, there is a big chance that Samsung will change its strategy toward Iran.
Iran is investing in its ICT sector like never before. In the past few years, Iran’s ICT infrastructure developed massively in comparison to the past. Only in the past three years, Iran’s internet bandwidth grew 590%, and the number of smartphones has increased by 900%. With this flood of smartphones in the hands of Iranians, mobile network operators didn’t just stand by, they upgraded their network from 2.75G to 3G and 4G network to the point that in Tehran you can get up to 30Mbps by using Irancell’s cellular network. But the speed of the Internet for the other two mobile network operators, MCI and Rightel is not as decent as Irancell. That’s maybe why the officials from these two operators were visiting Samsung HQ as well and not Irancell, because they are probably struggling with their technology capacity to offer the same data speed to their consumers as Irancell does. And the reason is obvious Irancell has MTN as a parent company, a multinational mobile telecommunications company with years of experience and technical know-how, but Rightel and MCI don’t have that backbone yet. These two mobile operators have been struggling with the sanctions in the past few years and even got behind their schedule because of it, but now they can’t afford to be left behind. And don’t forget there are 77.6 million active sim cards in Iran with an active mobile subscription penetration rate of 97.48 percent.
Back to Samsung, this company is one of the biggest companies in the world with many industrial subsidiaries including:
Samsung C&T Corporation (Construction & Trading Corporation)
Samsung Heavy Industries
Samsung SDS (Samsung Data Systems)
Samsung Life Insurance
Samsung Fire & Marine Insurance
Cheil Worldwide (a marketing company)
According to Forbes after Apple, Samsung Electronics is the second largest Tech company with $177 billion in revenue, $16.5 billion in profit, $206.5 billion in assets and a $216 billion market value in 2016. And by just looking at Samsung activities you could instantly realize why Iran is so eager to get Samsung. And of course, Iran’s untapped market potential is lucrative for Samsung as well.
If you live in Iran you probably use one of Samsung’s products which might be smartphones or appliances. Samsung Electronics has a wide variety of smartphones from low-end to high-end. It’s no surprise that Samsung is dominant in terms of market share with 51.8% of the market, according to Cafe Bazaar the Iranian Android market. Cafe Bazaar has 29M installs and with 51.8% of these handsets being Samsung made, there are nearly 15M Samsung smartphones in the hands of Iranians. Even with this huge market and consumer trust, Samsung Electronics doesn’t have any subsidiaries in Iran. They only have a sales office in Iran and the operation is supervised by the Dubai HQ. It’s clear that Iran wants to become the new Samsung HQ in the region but there are many obstacles that prevents Iran from reaching this goal. In Dubai, Samsung has better incentives, better tax regulations and operation costs. Most of the Samsung smartphones are manufactured in Vietnam. If Iran wants to get into manufacturing it needs political stability which could ensure Samsung that Iran can deliver.
The other obstacles in front of every foreign company which wants to enter Iran are the transparency and information about the companies, even governmental one. Finding the data that you need is hard and you can’t obtain it easily. In order to work with international companies, Iran needs to bring transparency on the table. Without transparency and flow of information, how could possibly any investor or company make a decision about this market. Yes, Iran might be the last untapped emerging market in the world but investing needs market data and information. This is why many companies have second thoughts about Iran’s market because they simply don’t know how this market works. Though the companies that have been here from before, they know how this market work, giving them a head start while others are afraid of entering in. Georgia had shift in it transparency policies under 5 years ago to in order to absorb more capital to the country. Iran can have a similar approach as well, this is a crucial and necessary act that the government must take to make the country more investment friendly and to create more interest for foreign investors.
For now, Iran is trying to get more investment and partnership deals in its ICT infrastructure, R&D and manufacturing with Samsung.
“It would help the Iranian team to have a dedicated task force for the talks with Samsung since this company has many technologies to offer Iranian consumers. This task force could constantly keep the track of the meetings and MOUs to be able to turn these agreements into contracts and actual cooperations. The Iranian team seems willing and can also come to actual agreements for to witness a full subsidiary of Samsung in Iran. Having a good insight on Samsung’s organizational structure and the Korean culture could also help the Iranian committee to ease the negotiation process,” saidNima Torabi, Global Strategist at Samsung Global Strategy Group who was also in the meeting that took place last week at Samsung Digital City in Suwon South Korea.
Overall, Samsung has a great market in Iran and with the U.S. sanctions prohibiting U.S. companies to work in the country, Samsung has a great opportunity at hand. At the end, we shouldn’t forget that Iran has an untapped market whether for Samsung or Apple or any other tech giant in the world. The question is who’s going to be here first.