December 23, 2016
Iran’s government has canceled what was billed as the largest privatization deal in the country’s history, the sale of the national telephone company to a trust for about $8 billion.
The sale was made in 2009 and the buyer, the Mobin Trust Consortium, was due to make its last payment in 2017. But the government says Mobin fell way behind in its payments so the Iranian Privatization Organization (IPO) has now canceled the deal and taken the Telecommunications Company of Iran (TCI) back into state hands, where it had been established in 1971.
Fifty percent plus one share of TCI was sold to the Mobin Trust Consortium in 2009 for 78 trillion rials, which was worth about $8 billion at the market exchange rate at the time, but is only worth around $2 billion now. Twenty percent of the purchase price was paid in cash at the time of the sale and the remainder was to be paid in 16 semiannual installments of 4.84 trillion rials ($124 million at the current market rate).
Despite repeated extensions of payment deadlines, Mobin Trust failed to meet its contractual obligations, according to an IPO official, Jafar Sobhani. “Therefore, IPO decided to revoke the takeover deal in accordance with the terms of the contract,” he told the Financial Tribune.
Noting that TCI’s stock value today is much higher than the price it was sold at in 2009, the official said the IPO is determined to defend the country’s national interests by canceling the sales deal “with the knowledge that TCI is a profit-making company.” In other words, IPO has discovered that the deal it made eight years ago isn’t so good in retrospect, given the devaluation of the rial.
A report by the daily Sharq said the refund of what Mobin had thus far paid in rials would come to just 1/80th of the company’s current value.
“IPO will soon put the government’s share of the company up for auction,” Sobhani said, telegraphing that the IPO just wants more money.
The change in valuation is undoubtedly true of many other businesses the IPO has sold off. Sobhani didn’t say if the IPO might cancel other sales.
According to Mir Ali Ashraf Abdollah Pouri-Hossaini, the head of the IPO, the value of Mobin Trust Consortium’s bad checks stands at 10 trillion rials ($250 million at the current exchange rate).
Mostafa Seyyed Hashemi, chairman of the Mobin Trust Consortium’s Board of Directors, believes “negotiations with IPO will solve the problem.”
An informed source with TCI, who wished to remain anonymous, told the Islamic Republic News Agency (IRNA) that IPO could only reclaim a fraction of the company since the Mobin Trust Consortium has paid a large part of the purchase money.
TCI is the leading provider of telecommunications services in the country. Its services include fixed-line telephone service, data services, mobile services, high-speed Internet and wireless services. TCI holds 99 percent of the fixed-line telephone subscribers and 61 percent of the mobile subscribers in Iran, according to the Financial Tribune.