MTN bid for Iran cash held by US sanctions
MTN is in talks with South African and US officials about moving money out of its Iran business, as tightening sanctions prevent it from repatriating funds.
The company, which on Wednesday reported a 14% rise in first-half profit, said that a likely devaluation of the Iranian rial — another result of US-led pressure on Tehran — could have a "severe impact" on second-half results.
The mobile operator owns 49% of MTN Irancell, which contributes nearly 10% of its total revenue, but has become a growing headache, with the potential to tarnish MTN’s image as a post-apartheid success story.
MTN is being sued by rival Turkcell for $4.2bn in a US court, saying it used bribery and lobbied the South African government to support Tehran’s military in return for a 2005 cellular licence in Iran that was originally awarded to the Turkish firm. MTN denied the charges and called Turkcell’s demands "extortionate".
CE Sifiso Dabengwa told reporters after MTN’s first-half results on Wednesday MTN had been unable to take cash out of the business for at least six months.
"There is general acceptance that we should not be punished. US sanctions should not have unintended consequences for non-US companies," he said.
Washington is putting raised pressure on Iran over its nuclear programme and appears to be cracking down on non-US companies with ties to the country.
New York regulators accused British bank Standard Chartered on Monday of scheming with the Iranian government and hiding $250bn worth of transactions.
In Cape Town on Wednesday, US Secretary of State Hillary Clinton called on SA to use its long-standing links with Tehran to persuade Iran to reconsider its suspected pursuit of nuclear arms.
"SA can play an even greater role on issues like curbing Iran’s pursuit of nuclear weapons, or preventing nuclear materials from falling into the hands of terrorists," Ms Clinton said.
The Iran issue will have a detrimental effect on MTN’s future in terms of revenue, Mervin Miemoukanda, a research analyst at consulting firm Frost & Sullivan, said yesterday. "With all the uncertainty around Iran, the future is not bright in terms of revenues and subscribers."
MTN, which operates in 21 countries across Africa and the Middle East, is likely to see its earnings squeezed if Iran devalues the rial, said chief financial officer Nazir Patel.
The currency has tumbled against the dollar in free market dealings as traders bet on a devaluation in the official exchange rate. Iran’s central bank governor said on Sunday that a change to the government’s "reference rate" would be announced within the next 10 days.
"It is likely to have a severe impact on second-half earnings," Mr Patel said.
Despite the complications of sanctions, Iran continues to be a money-spinner for MTN.
The mobile operator reported a 14% rise in adjusted headline earnings per share, as growth in Iran, together with SA and Ghana, helped overcome tough competition in the key Nigeria market.
Revenue from the Iran business jumped 30% in the six months to end-June. S ubscribers increased more than 10%, to more than 38-million and Iran now accounted for 22% of MTN’s 176-million subscribers.
"I don’t think they are prepared to lose 20% of their customer base.
"They will find ways of continuing to operate in Iran — even if it’s tough," said Mr Miemoukanda.
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