The Audited Discount Rate on an Iranian Cash Flow Is 79 Percent

MTN's reviewed interim statements for the six months to 30 June 2026 publish the assumptions behind the impairment test on its 49 percent stake in Irancell: a weighted average cost of capital of 79 percent, 44 percent and 36 percent, a terminal growth rate of 25 percent and capex intensity of 20.3 percent. Of the 370 companies in the Tehran Index registry, not one had a published cost of capital before this. The same notes carry a reviewed rial rate that implies 145,793 toman to the dollar, close to the free market rather than to any official rate.

Ask an allocator what discount rate they would apply to an Iranian cash flow and you get a shrug, a range, or a refusal. There has never been a published number to argue with. On 24 August 2026 there is one.

MTN Group’s interim financial statements for the six months ended 30 June 2026, reviewed by its external auditor and filed in Johannesburg, disclose the assumptions behind the impairment test on its 49 percent stake in Irancell, Iran’s second mobile operator. The weighted average cost of capital is given as 79 percent, 44 percent and 36 percent. The terminal growth rate is 25 percent. Average capex intensity is 20.3 percent. The forecast window is 2026 to 2028.

No company in the Tehran Index registry has ever carried a figure like this. On 25 August 2026 we searched all 623 public rows of the facts layer, covering 181 of the 370 companies on the public record, for a weighted average cost of capital, a cost of capital, a discount rate, a hurdle rate or a required return. Zero rows. One row contains the word discount and it describes a consumer discount business, which is not the same thing and does not count. This is the first, and it arrives from outside the country.

What a 79 percent cost of capital is actually saying

Three cost of capital figures against a three year window is the shape of a declining series, and in a nominal model built on a hyperinflation-accounted asset a declining series is what you would expect: the discount rate carries expected inflation, and expected inflation is assumed to fall. MTN does not say which figure belongs to which year, so we do not either. What is not ambiguous is the top of the range. Somewhere in that forecast a cash flow is being discounted at 79 percent.

The terminal growth rate is the number readers will misread first. Twenty five percent terminal growth would be absurd in a normal model, because no business grows faster than its economy forever. It is not a real growth rate. It is nominal, sitting inside an asset that has been hyperinflation accounted since 1 January 2020, and it is doing the work of an inflation assumption.

Which is the interesting part. Put the terminal growth rate against the lowest cost of capital and the spread is eleven points. A terminal value capitalised at 1 divided by that spread is 9.09 times. Move the terminal cost of capital up by a single point and the same terminal value falls 8.3 percent. Move it four points and it falls 26.7 percent. That arithmetic is ours, not MTN’s, and it is the whole fragility of the mark in one line: when the discount rate and the growth rate are both enormous, the difference between them is small, and small differences move violently.

This is the equity side of a question we have already answered from the debt side. What it costs to borrow in Iran measured the price of domestic debt in toman, on audited statements from Tapsi, the only listed company of Iran’s smartphone era. This is the price of equity, applied from outside, in rand, by a different auditor, to a different asset. They are two halves of the same cost of capital and until now only one half existed in English.

The rate the reviewed statements actually use

The same note set carries something else nobody has read in English. Note 16 is a table of exchange rates to the South African rand, and the Iranian rial is a line in it. MTN publishes no toman figure and no rial to dollar rate. It publishes rial per rand and rand per dollar. Multiply the two and you have the rate an external auditor signed off on.

At the 30 June 2026 close that is 145,793 toman to the dollar. Twelve months earlier it was 69,441. The rial per dollar figure MTN uses more than doubled in a year, up 110.0 percent, and rose 86.5 percent in the six months from the 31 December 2025 audited close alone.

Now put it next to ours. The Tehran Index daily FX series begins on 1 July 2026, the first trading day after MTN’s balance sheet date, and its mean working rate that day across nine separate captures sits 19.2 percent above MTN’s implied close. Read the other way, MTN’s rate is 16.1 percent below the free market on the nearest day we cover.

We are not going to pretend that gap has one clean explanation, because a one day offset, a mid-market convention and a different source basis could each account for part of it. What matters is the order of magnitude. The rate a JSE reviewed set of accounts uses to translate Iranian results is close to the free market, not to any official rate. A reader who assumed international auditors were still translating Iran at a preferential rate should stop assuming it.

Strip out the accounting and the currency still did it

MTN’s share of Irancell’s attributable earnings for the half was negative R3,458 million, against a positive R1,401 million a year earlier. Footnote 1 to note 9 says that figure was reduced by a hyperinflation effect of R3,907 million, which includes an impairment of R3,900 million. Note 5.2 confirms the Irancell impairment attributed to MTN is R3,900 million in the current period and nil in prior years.

So take the accounting out of both halves and see what is left.

R449 million against R1,084 million. Down 58.6 percent, with no impairment and no hyperinflation adjustment in either figure. The residual column is our arithmetic on MTN’s published lines and MTN neither publishes nor endorses it, but the inputs are its own and the subtraction is not in dispute.

That is the finding. The headline number is an impairment and the impairment is non-cash, so the reflex is to look through it to the underlying business. Look through it and the underlying rand figure has still lost more than half its value in twelve months, on an asset that on MTN’s own prior disclosure was growing service revenue and expanding its margin. The rial moved 110 percent against the dollar over the same period on MTN’s own published rates. The translation is doing the damage, not the operator.

Which is the argument Iran’s exit problem is an exchange rate problem made from one Swedish holder marking a consumer internet portfolio to fair value. Here it is a second holder, in a different jurisdiction, on a different accounting basis, on a telecom joint venture rather than minority equity stakes, reaching the same place. Two independent audited records is not a coincidence. It is a mechanism.

What this is not

This is not a valuation of Irancell and cannot be turned into one. Tehran Index publishes no valuation of a private Iranian company, and even if we did, an equity-method carrying value is cost plus the holder’s share of post-acquisition results less impairment. It is not a market price for 49 percent and it does not gross up to a market price for 100 percent. Anyone dividing by 0.49 is manufacturing a number.

MTN’s note names a cause for the reassessment that sits outside what Tehran Index covers, alongside the two financial ones. We work only with the two it names that are market mechanics: the deterioration of the rial exchange rate and an increase in the discount factor. Both are quoted above in MTN’s own words.

And this is not the same piece as Iran’s second mobile operator reports its numbers in Johannesburg. That one established where the audited record physically lives and said plainly that it could not reach an Irancell earnings figure or a carrying value, because the relevant note in the annual statements was outside what we could extract. The interim statements published on 24 August 2026 gave us the earnings line, the impairment and the valuation inputs. This is the follow-up that piece promised.

Two of 370, and what they are worth to a reader

On the Tehran Index registry, two of 370 public companies have a shareholder that files audited accounts on a stock exchange anywhere in the world, and it is the same shareholder for both: Irancell and Snapp. That is a thin base and we have never pretended otherwise. But it means MTN’s reporting calendar is, in practice, the only recurring audited window onto Iranian technology assets that exists, and the window opens twice a year.

For anyone underwriting Iranian exposure, three things now have a number attached where they previously had none. The discount rate an international group applies: as high as 79 percent. The translation rate an external auditor will accept: close to the free market, not to an official one. And the size of the currency drag on a rand or dollar denominated return: more than half of it in a single year, before any impairment.

What we do not know

MTN does not publish an Irancell carrying value in these interim statements. Its group-wide investment in associates and joint ventures line fell from R24,094 million at 31 December 2025 to R12,992 million at 30 June 2026, a fall of R11,102 million, and the only shareholding change disclosed in note 18 is an employee share scheme vesting at MTN Ghana rather than an associate disposal. The Irancell charge plainly dominates that movement, but MTN does not break it out and we will not infer a carrying value from a group line. Figures circulating in secondary coverage that put the stake at about R10.5 billion appear nowhere in the statements we read, and are not used here.

We do not know which cost of capital figure applies to which forecast year, and MTN does not say. We do not know what discount factor was used in the prior test, so the increase MTN refers to cannot be sized. We do not know the source or convention behind MTN’s rial rate, only the two lines it publishes.

On our own record, two conflicts on Irancell remain open and were open when we last published. Our company row gives one domestic name for the 51 percent holder and our ownership fact row gives another. Our subscriber figure of more than 69 million active accounts and a note added on 18 August 2026 reading about 56 million have not been reconciled. Neither is smoothed over here.

R2,009 million of Irancell receivables is classified as non current and presented inside the investment in associates and joint ventures line, on MTN’s stated basis that settlement is neither planned nor likely in the foreseeable future. We report the classification and the number. We do not report the reasons MTN gives for it, which are outside our perimeter.

Cite as: Tehran Index, “The Audited Discount Rate on an Iranian Cash Flow Is 79 Percent”, 25 August 2026. Valuation assumptions, earnings, receivable and exchange rate figures from MTN Group Limited, financial results for the six months ended 30 June 2026, notes 5, 9, 16, 18 and 19 and the condensed consolidated statement of financial position, Group interim financial statements independently reviewed by the external auditor. Implied toman rates, the residual earnings column, the terminal value sensitivity and the registry counts are Tehran Index arithmetic, computed 25 August 2026, on the registry and the Tehran Index daily FX series. tehranindex.com