Huge US sanctions headache for MTN
South Africa’s MTN Group said its plans to exit its investment in Iran are being hindered by US sanctions on the Middle Eastern nation.
“You cannot take money in and you cannot take money out,” making the group’s investment in that country “a frozen asset,” Chief Executive Officer Ralph Mupita told reporters at a briefing in Johannesburg on Friday.
“Our strategy has been a full exit on the Middle East.”
The Johannesburg-based group holds a minority interest in Irancell, which is not under its operational control, while it sold its Afghanistan operations early last year.
MTN is facing a US Department of Justice grand jury investigation into its conduct and that of its former unit in Afghanistan and Irancell.
MTN has not made provisions for the outcome of the probe because it does not involve financial claims, Mupita said.
“There is no claim, so there is no provision or contingency,” Mupita said.
The company on 27 August said that it’s “respectfully defending cases brought against” it by plaintiffs in the US and “maintains that the plaintiffs have sued the wrong defendants in the wrong courts.”
Market Consolidation
With operations in 16 countries cross Africa and the Middle East, its home market South Africa accounts for less than a third of the group’s revenue.
The South African market needs consolidation in infrastructure and telecoms operators because the profit pool is limited, Mupita said.
A decision by the country’s antitrust authorities to allow Vodacom Group Ltd. to buy Remgro Ltd.’s fiber assets “is a major inflection point,” he said.
Bloomberg reported on Thursday that MTN is considering reviving talks to acquire smaller South African rival Telkom SA, citing people familiar with the matter.
Telkom has also been talking to advisers about its options if a new takeover bid is launched, said the people, who asked not to be identified because information is still private.
The two companies could begin negotiations before the end of the year, though there’s no guarantee that these talks would lead to a deal, they said.
Representatives for MTN and Telkom declined to comment.
MTN walked away from early negotiations to buy Telkom in 2022 after the two disagreed on exclusivity and amid concerns about winning antitrust approval for a deal that would have created South Africa’s dominant mobile phone operator.
South Africa’s government is pushing to secure better connectivity for the country, and boost investment in rural areas.
The telecommunications industry has argued that this is only commercially viable if infrastructure isn’t duplicated.
To bolster its deals capacity, MTN has placed its Chief Financial Officer Tsholofelo Molefe – who is also a former Telkom executive – at the head of its mergers and acquisitions unit.
A combination with Telkom could close the gap with rival Vodacom, South Africa’s market leader controlled by the UK’s Vodafone Group Plc.
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