Telkom Abandons Bid for Iran Stake

After months of study and talks, state-owned PT Telekomunikasi Indonesia has finally decided to scrap a plan to acquire a large stake in Telecommunication Company of Iran, ultimately deciding that the risks outweighed the potential rewards, a high-level government official said.

The plan for Telkom, Indonesia’s largest telephone company, to buy a stake of 30 percent to 50 percent in Iran Telecom was abandoned partly because of the fluid and sometimes volatile political situation in Iran following disputed election results last month, said the source, an official with the State Enterprises Ministry, who declined to be named.

In addition, Telkom earlier said that Iran Telecom’s previous decision to offer the stake via a tender offer, which attracted aggressive Chinese and Russian companies, had created a large obstacle to it acquiring the stake.

“The scheme [offered by the Iranian government] for purchasing the stake keeps changing,” the source said. “Under the first proposed scheme, Telkom was to be appointed as the operator and would jointly provide funding with a local pension fund firm so that we could bring our expertise there. Telkom was very serious about doing that,” he said.

“The political situation in Iran after the election also increased the risk too much compared with the reward,” the source said.

The Iranian company holds a monopoly on the country’s fixed-line market and is the largest cellular operator there. It floated 2.2 billion shares in an initial public offering on the Tehran Stock Exchange in August, raising 3.3 trillion Iranian rials ($332 million).

Eddy Kurnia, Telkom’s vice president for public and marketing communications, on Sunday would not confirm or deny that the plan had been abandoned. “Telkom needs to conduct serious due diligence before moving on with the plan. We’re talking about million of dollars in investment here,” he said, adding that the need for a conducive political and social environment would play an important role in the decision.

Telkom’s plan to seek a stake in Iran Telecom was revealed in the second half of last year. It was also hampered by Iran’s hostile r e lations with the United States, with Tehran insisting that companies investing in Iran Telecom have no US-based shareholders. Many US-based pension firms own shares in Telkom.