Iran Mobile Market: Prices High, Supply Low

EghtesadOnline: During the seven months to Oct. 22, 1.7 million mobile phones were imported into Iran. This is while monthly domestic demand for cellphones is said to be over and above 1 million. This has created chaos in Iran’s mobile phone market with prices going through the roof.

News ID: ۷۴۶۲۶۶

26 November 2018

According to data released by the Islamic Republic of Iran Customs Administration, during the seven-month period, 1,737,475 cellphones worth $266 million were imported. The numbers indicate a 28% and 43% increase in imports respectively in terms of volume and value, ISNA reported.

While authorities report a "significant increase" in mobile phone import, the deputy head of Tehran Chamber of Guilds, Ebrahim Dorosti, told Peivast news website, “Monthly demand for handsets is between 1 and 1.2 million units.”

Over the past few months, while authorities boasted about the “significant increase” in mobile phone imports, market observers pointed out that prior to the introduction of the so-called Mobile Registry Scheme, most handsets sold in the country were smuggled, adding that the number of handsets entering the country is less than one-fifth of demand, according to Financial Tribune.

To curb smuggling, the ICT Ministry, IRICA, the Communication Regulatory Authority, and the Industries Ministry created the Mobile Registry Scheme according to which local operators are barred from offering services to contraband gadgets.

For implementing the scheme authorities use an online database of the IMEI, or the International Mobile Equipment Identity, number of the functioning handsets. IMEI is a unique number—like fingerprint for electronic devices—that helps identify a mobile phone.

The IMEI number is used to identify valid devices. Therefore, only cellphones which have entered the country through legally can be used. Due to the introduction of the scheme, mobile phone smuggling has become a thing of the past so far as Iran is concerned.

Economic Hurdles

Introduction of the Registry Scheme, along with new economic challenges Iran has been facing over the past several months have hampered the entry of mobile phones and disrupted the market.

The national currency has lost 70% of its value since April and foreign currency rates have reached unprecedented highs. On Sunday the US dollar was traded at 125,000 rials in Tehran. The greenback was sold for 160,000 to 180,000 rials some weeks earlier. In March it hardly fetched 42,000 rials.

In face of the economic turmoil, the government of President Hassan Rouhani introduced a multitier system for allocation of hard currency to businesses and importers, which ranked goods based on their “importance”, with authorities deciding which firms were eligible for hard currency and at what rate.

According to the government, mobile phones are not among the import priorities and do not get subsidized currency. Officials have created a Forex Deals Integrated System, locally known as Nima, as a platform for business to buy (and sell) foreign currency in bulk.

The Nima policy rattled the market and created tensions in the local technology shopping centers. One of the drawbacks of the system was that Nima let a handful of people decide who is entitled to subsidized currency, which was a welcome sign for racketeers waiting to make an extra buck.

In the Fraud Business

To help calm the hot mobile phone market and tame rising prices, the government allocated subsidized foreign currency at 42,000 rials to the USD to a group of businesses to import 600,000 mobile phones. The plan flopped as many importers were accused and later prosecuted for embezzlement, hoarding and defrauding the government.

Following public outrage over the scarcity of cellphones in the market, the ICT Ministry stepped in to apparently promote transparency by releasing the name of companies that had bought the greenback at 42,000 rials for importing the cellphones.

According to the ministry’s list, 40 companies received €118 million, 30 of which used €75 million to bring mobile phones. Out of the 40, only three upheld their commitments, four have so far not released their cargo from the customs warehouses while 24 firms either hoarded the mobile phones or ripped off buyers with their exorbitant prices.

A number of the companies have been found guilty while others are under investigation. High-end handsets from Apple and Samsung cost over  $1,000 in global markets. With the tanking of the rial and imports in disarray cellphone prices in Iran have a rule of their own, which is no rule!

The Samsung Galaxy S9 Plus is sold in local markets for 129 million rials ($1,032), Apple iPhone Xs Max is offred at a prohibitive 310 million rials ($2,480) and the Chinese  Huawei Mate 20 Pro cab be had at 133 million rials ($1,064).

This is while the government-mandated minimum wage in Iran is 11.14 million rials ($89.12). Skilled people and white collar workers make do with less than 30 million rials ($240).