The mobile phone market is on the edge of a precipice as an uncertain foreign currency rate and the war on smuggled handsets have led to a slump in the once prospering business.
Forex fluctuations are said to be the chief culprit behind the sluggish trend, according to an interview with the head of the Telecom Traders Union Mahdi Mohebi by Mehr News Agency.
Mohebi says due to uncertainties in the forex market, customers are reluctant to purchase mobile phones. “From a month before Norouz [Iranian New Year, March 20], demand and supply started to tumble.”
He is of the opinion that until the return of stability to the currency market, the present state of stagnation will prevail.
Mohebi says mobile phone prices are still “reasonable” and “appropriate” considering the skyrocketing US dollar exchange rate and it is high time to purchase a handset if someone needs one implying that the prices are certain to spike in the coming days.
The common definition of the term “appropriate” might differ from the one the TTU’s head has in mind.
To have an overview of mobile phone prices in Iran it would suffice to compare flagship handset prices in Iran with what they are traded for in the global market.
Samsung’s Galaxy S9 is priced over 40 million rials ($953) in the local market some $234 higher than the price tag put on the device by the South Korean firm.
Apple’s iPhone X changes hands for 71 million rials ($1,700) in Iran $550 over and above its global retail price. The same applies to almost all handsets offered in Iran—mid-range or high-end.
Already in Hot Water
According to market insiders, two factors have contributed to the current state of affairs, one is forex fluctuations discussed by Mohebi and the other is the implementation of the Cellphone Registry Scheme.
Aimed at curbing cellphone smuggling, the ICT Ministry, Islamic Republic of Iran Customs Administration, Communications Regulatory Authority and the Industries Ministry created the Registry Scheme that bars local operators from offering services to contraband phones.
Implementation of the scheme had been phased to prevent a shock to the huge cellphone market. With the scheme gradually taking effect since December, mobile phone prices jumped 20-35%. For flagship handsets, it translates into a $200 to $300 rise per piece, creating further financial difficulties for a population already incapacitated by inflation and unemployment.
The scheme went into full swing as of April 21. The measure has almost tripled government revenue from customs duty and imports tax levied on cellphones.
However, if the slack market persists, the administration’s income from the project will most likely shrink.
On the Ground
As witnessed by mobile-store owners, the public has been turned away from purchasing mobile phones due to rampant unemployment and a struggling economy.
Dealers express discontent over the lack of mobile phone demand in the market, and level criticism at the government for mishandling the Registry Scheme.
An unnamed salesperson has told Fars News Agency that the rights to mobile imports are handed over to a few companies, creating a monopoly that gives the chance to control the prices and the market.
An angry seller talked to reporters, complaining that, “Before this, a customer could purchase a mid-range Samsung model with 5 million rials ($119), now they cannot afford a Huawei model [which is considered inferior] even with 6 million rials [$142].”
The public is now leaning toward getting their hands on second-hand cellphones to compensate for the price jump.
Salesmen speak of uninformed consumers as another reason factoring in the slowdown, placing part of the blame on those who are not aware of the Registry Scheme and its effects.
“People are confused by the new prices, and when they hear the prices, they give up obtaining phones altogether.”
A population that used to replace their mobiles with higher models every two years or so no longer see themselves allocating a part of their salary to buying gadgets.
Simmering Anger
Another dealer says the government is driving a wedge between sellers and the people by denying the impact of the rising dollar exchange rate on the mobile market.
According to him, such comments by officials have fueled the public suspicion of store owners. He suggests authorities stop denying the effects of the bullish foreign currency market.
“People no longer have purchasing power, Samsung handset prices have jumped more than 4 million rials [$95] and other models have experienced 2-5 million rials [$47-119] hikes. It is reasonable of the people to not buy mobile phones anymore but this is pushing us to the verge of bankruptcy,” said an unnamed seller.
A rise in mobile phone prices with the arrival of the New Year is nothing people are not accustomed to. However, the price increase this year did not follow every year’s pattern.
A customer says the increase is no longer reasonable, the market is shocked, “and prices have shot up horrendously, up to 10 million rials [$238].”
A disillusioned salesman spoke of the authorities’ broken promises, saying before the implementation of the Registry Scheme they had assured the public merely a 10% rise in prices, adding in an angry tone, “Can they count? Anyone can do the math. Prices have jumped 50-60%!”
Alternative Perspective
Although the public has the right to criticize the government, they should also avoid bias in their judgments.
While it is true that granting few companies the rights to import handsets can create monopolies, but those companies are now required to offer after-sales services to customers, a “privilege” that most of them were previously deprived of when over 90% of mobile phones brought into the country were contraband.
Customers, sellers and soon the government of President Hassan Rouhani will all be on the receiving end of the damage caused by the stagnant market unless someone turns the table, which many are doubtful about its likelihood.
