Tug-of-War // The Battle for the Telecommunications Company of Iran
On 13th December the Director of the government-run Privatisation Organization of Iran Mir Ali Ashraf Abdollahpouri Hosseini announced that it was considering the cancellation of the Telecommunication Company of Iran’s privatisation agreement. As a result, the Revolutionary Guard (IRGC)-controlled Mobin Trust Consortium is at risk of losing its majority shareholder status in Iran’s largest telecoms company, reversing the largest ever transfer of Iranian state assets to an IRGC-affiliated organisation. If the POI follows through with its threat to bring the TCI back under government control, the Rouhani government may be empowered at the expense of Iran’s conservative and ultra-conservative political factions.
According to Abdollahpouri Hosseini, the Mobin Trust Consortium failed to make a number of payments required under the original privatisation agreement. The IRGC-controlled company was obligated to pay 20% of the total value of the contract upon signing the initial privatisation deal in 2009, and pay the rest over the course of 16 six-monthly installments.
The company isn’t going down quietly, however. On 19th December, the Mobin Trust Consortium’s Managing Director Mehdi Safari published a letter to the Tehran Stock Exchange, in which he stated: “The IPO’s action is illegal, and Mobin Trust remains the owner of 50%+1 of shares in TCI”. At the time of writing, no officials from the Rouhani administration have publicly reacted to the IPO’s announcement. On 15th December 2016 ICT Minister Mahmoud Vaezi stated that he was following the news just like everybody else.
However, he should perhaps not be taken at his word — the government has a big stake in this crisis. The reversal of the TCI’s privatisation could mark the latest chapter of an ongoing struggle by the Rouhani government to keep state assets out of the hands of the IRGC and its affiliates. Let’s take a moment to see how the battle for the TCI started, and to discuss the wider consequences of the TCI’s privatisation for Iran’s ICT sector.
Looking Back — The 2009 Privatisation of the TCI
The privatisation of the Telecommunication Company of Iran (TCI) was first announced in March 2007 during the first term of the Ahmadinejad administration. The government-run Privatisation Organisation of Iran (POI) announced that the Telecommunication Company of Iran (TCI) and its subsidiaries (including the Mobile Communications Company of Iran (MCI)) would be offered up for sale on the Tehran Stock Exchange in late September 2007. A series of delays pushed this date back into Ahmadinejad’s second term — shortly after the conservative establishment (and its IRGC enforcers) suppressed the 2009 uprising.
At the end of September 2009, the IRGC-controlled Mobin Trust Consortium secured the tender for the TCI in partnership with Sina Bank (itself closely linked to Iran’s Supreme Leader). At $8bn, this sale was the biggest in the history of Iran’s stock exchange. The IRGC affiliates’ only competitor was the Pishgaman Group Cooperative, although the group was squeezed out of the process by the Ahmadinejad government, and replaced by the Basij-affiliated Mehr Finance Investment Company.
After spending around 150 billion IRR (around $1,507,500 in 2009) to be considered for the sale, the Pishgaman Group was frustrated at its removal from the competition. Pishgaman’s CEO later said in an interview: “We did not wish to leave the competition — we were forced to exit the deal”. Some officials at the time criticised the group on security grounds, stating that they were unqualified to take over the TCI.
As a result of the sale, 50%+1 shares in the TCI are controlled by the Mobin Trust Consortium and Sina Bank. The ICT Ministry owns a further 40%, TCI employees another 5%, and a further 5% was sold to private investors on the Tehran Stock Exchange. Up until now, the IRGC affiliate Mobin Trust has retained its controlling stake in the TCI.
The Long Break-up — The TCI During the Rouhani Era
Since the election of Hassan Rouhani’s government in 2013, relations between the elected government and the TIC haven’t been quite so cosy as they were under Ahmadinejad. Over the past three years, the ICT Ministry and the TIC have locked horns on a number of occasions, generally over financial arguments. These disagreements ranged from the ICT Ministry cancelling the TCI’s licenses to sell internet services in Iran’s provinces, to its decreasing the bandwidth capacity of the Telecommunications Infrastructure Company (TIC) due to delays in payments and poor service provision. These conflicts had a habit of dragging on interminably without concrete resolutions.
Indeed, the situation deteriorated to such an extent that 100 MPs signed a petition calling for the renationalisation of the TCI in November 2015 “as a result of frequent faults and lack of acceptable services from the TCI”.
It is likely that these conflicts were often about more than just internet service provision. The conflict should be seen against the backdrop of the Rouhani administration’s wider campaign to push the IRGC out of key industries, such as in the oil sector or shipbuilding industry. IRGC getting more massive contracts such as oil sector or ship making.
That being said, there have been hints at a possible reconciliation between the TCI and ICT Ministry ever since the appointment of the ‘compromise candidate’ Barat Ghanbari as the TCI’s Director. Since his appointment, the TCI and government have taken a more conciliatory approach in their disagreements, and the Rouhani government even agreed to increase the TCI’s fixed landline tariffs — something the TCI has been lobbying for to little effect since 2004.
A Power Grab? — Rouhani’s Odds Against the IRGC
Ever since the parcelling out of state assets under the Ahmadinejad administration, the IRGC has enmeshed itself in a whole raft of key investment projects, from the oil industry to construction and the finance sector. However, the Rouhani government looks to be working to turn the tide.
Even with all its power, however, it is clear that the Rouhani administration has a tough task ahead of it. It appears that the Rouhani administration’s strategy of reconciliation with the TIC was a short-term one, and that the government now sees an opportunity to bring the TIC back into the fold for good. Whether it is successful in this attempt remains to be seen — the government has hesitated before pulling the trigger on renationalisation, and if the Mobin Trust Consortium gets up-to-date on its payments, then they may yet retain control over the TIC.
Nonetheless, the episode stands as a strong statement of intent by the Rouhani administration — the IRGC is being told to pay its dues, or lose out on a key asset for good.
