ISP Mergers to Challenge State-Backed Telecom Co.

Following reports about a merger between two of the largest local Internet Service Providers, HiWeb and Pars Online, AsiaTech — one of the other famous names in the sector — says it also is planning to join the conglomerate.

HiWeb signed a merger agreement with Pars Online on Saturday. According to an official statement from HiWeb seen by Financial Tribune, the two companies from now on will operate under the HiWeb brand.

Later on Sunday AsiaTech CEO Ali Yousefizad said “AsiTech and HiWeb have held preliminary talks on a possible merger.”

According to sources familiar with the HiWeb-Pars Online deal, other ISPs may also join in.

With the introduction and growth of third and fourth generation mobile telecommunication technologies in recent years, ISPs have observed a noticeable decline in revenues as users in increasing numbers rely on mobile services to surf the net.

From what is known, none of the ISPs has the funds to compete with Iran’s largest fixed landline service provider -- the state-backed Telecommunication Company of Iran. TCI has emerged as an unchallenged monopoly.

Telecom Minister Mohammad Javad Azari Jahromi says, “Mergers and acquisitions between local ISPs will enable private businesses to cut cost, raise funds and compete with TCI.”

Jahromi suggested that the powerful Communication Regulatory Authority may provide the M&As incentives. It is not clear what the CRA has in mind.

 Stock Exchange Reaction

According to market observers, the news of the latest merger has increased demand for HiWeb shares. However, the lack of financial details about the HiWeb-Pars Online deal has prompted stock market regulators to suspend HiWeb’s trading ticker in Sunday’s trade until further notice.

HiWeb responded later in the day through a letter to the Securities and Exchange Organization that although the agreement was signed by the two parties, its fate  depends on CRA approval and that the process could take up to a month. It said  financial details “will be made public as soon as possible”.

The 4-trillion-rial ($100 million) ISP floated 10% of its shares through its initial public offering on the Tehran Stock Exchange back on Sept. 13 and the price of each share was 4,795 rials.

HiWeb signed a non-equity “partner market agreement” with Britain’s biggest mobile operator Vodafone in October. The latter is a multinational telecoms company based in London.