State-owned telecoms operator Telecommunications Company of Iran (TCI) raised just a fraction of the value investors expected when its shares listed on the Tehran Stock Exchange on 7 August.

TCI raised just $365m from the sale of a 5 per cent stake, valuing the company at $7.3bn.

The low valuation follows revelations that it made only $100m in net profits over the Iranian year ending on 20 March 2008. “That is way below what we thought it would list at,” says Ramin Rabii, managing director of Tehran-based fund manager Turquoise Partners, which has bought some of the floated shares. “I thought it would be $12bn and the government thought it would be even more.”

Hamid-Reza Nikoofar, an adviser to the chief executive of TCI’s mobile phone division, said in 2007 that an independent analyst had valued the company at $16bn (MEED 7:9:07).

The lower than expected proceeds from the listing follow a poor year for the company. TCI has more customers than any other phone operator in the Middle East, with more than 23 million users.

However the state-owned giant made only slightly more money over the year than Paltel, the operator that serves the much smaller West Bank and Gaza area, which made $92.5m profit from its 1.2 million users.

The Iranian company’s profits collapsed from $1.7bn in the Iranian year ending in March 2007, although revenues held up at more than $5bn for the year ending in March 2008. It made about $100m after taking all its costs out.

All state companies are required to pay 40 per cent of their earnings to the Treasury.

TCI’s profits were published in its first set of financial results, which it was obliged to disclose in the run-up to its flotation.

According to the results, TCI paid $700m to the Iranian government in tax over the period, as well as several hundred million dollars in other unnamed charges.

TCI will not have to pay the 40 per cent tax to the Treasury this year because it became exempt from it after floating a 5 per cent stake in the company on the Tehran Stock Exchange.

Heidari Kord Zangeneh, chairman of the Iranian Privatisation Organisation, says a further 26 per cent stake in TCI will be offered to investors, including foreign companies, in the next four months.

“They may sell that as one single block or several blocks,” says Rabii. “They may sell 6 per cent gradually on the Tehran Stock Exchange and the rest in a large lump.”

Zangeneh says a total of 51 per cent of the company will eventually be transferred to private ownership.

However, 20 per cent of this will consist of ‘justice shares’, which are distributed by the government free of charge to poor Iranians. Justice shares cannot be traded.

TCI in numbers

• $100m: Profit over year to March 2008

• $5bn: Revenue over year to March 2008

• $700m: Tax paid to Tehran over year to March 2008

• $7.3bn: Value of company on listing

Source: MEED