Telecommunications group MTN remains optimistic about prospects in Iran, despite the recently renewed US sanctions blocking further attempts at repatriating funds due to it from 49%-owned joint venture MTN Irancell.

In May, the US withdrew from the Joint Comprehensive Plan of Action (JCPOA) agreement and intends reimposing economic sanctions against Iran in two phases – the first came into effect on August 7 and the second is expected on November 5.

The move, which significantly impacted on Iran’s economy, will limit MTN’s ability to repatriate cash from MTN Irancell, including future dividends, as well as pressurise the official exchange rate used to translate dividend and loan receivables.

As at June 30, Iranian rial-denominated dividends receivable and loans totalled R3.4-billion, with an official exchange rate of IR42 490 to the dollar, says MTN group CFO Ralph Mupita.

Following the decision about the US to withdraw from the JCPOA, the rial has depreciated sharply and access to foreign exchange has become more difficult, pressuring economic growth in the country.

“We will continue to monitor the situation, including the response of the Iranian authorities and the other JCPOA members,” he says.

However, he is not optimistic about any funds being returned in the next three years.

Two years ago, Iran emerged from a decade of economic isolation when a deal resulted in the lifting of the crippling sanctions against the Middle Eastern country, enabling MTN shortly thereafter to start remitting some of the then R15.8-billion owed to the South African company.

This followed the July 2015 JCPOA agreement between China, France, Germany, Russia, the UK and the US – collectively known as the P5+1 – along with the European Union (EU) and Iran to ensure that Iran’s nuclear programme is “exclusively peaceful”.

The JCPOA was officially adopted in October 2015, followed by its implementation in January 2016, with the US and the EU lifting sanctions as Iran met its nuclear commitments.

During 2018, MTN Group repatriated €88-million from MTN Irancell, including €61-million relating to the full 2017 dividend due to MTN, as well as a further €27-million of historical dividends.

Despite continued challenges in repatriating funds from MTN Irancell, the board remains committed to plans to declare a total dividend of 500c per share for 2018 and is targeting growth of 10% to 20% over the medium term.

Capital expenditure decreased 45.4% in the first half of the year; however, the group continues deploy additional third-generation (3G) and fourth-generation (4G) network sites, undertaking extensive network optimisation and completing successful spectrum refarming.

MTN Irancell posted good results for the first half of the current financial year and remained the market leader in terms of data services, with data revenue increasing by 48.2%, data traffic volumes by more than 110% year-on-year and service revenue by 16.1%.

By the end of June, of the total of 44.6-million subscribers, 19.3-million were active data subscribers, and the group reported strong subscriber net additions, as more subscribers moved to 3G-enabled devices.

Some 81% of Iran’s population is now covered by 3G, with 813 sites deployed, and 74% is covered by 4G coverage, with 980 sites rolled out.

Despite an increase in transmission costs, optimisation in other areas of the business led to total costs being managed and this contributed to earnings before interest, taxes, depreciation and amortisation of R6.7-billion, a 167% increase year-on-year.

Regulatory Roadblocks

Meanwhile, the group resolved some key regulatory issues in Cameroon and Benin during the first six months of the year.

MTN Cameroon renegotiated its licence agreement as part of an addendum for the use of 4G spectrum, says MTN group president and CEO Rob Shuter.

In April, MTN Benin reached an agreement with the Benin government over ongoing and future frequency fees, and concluded a memorandum of understanding on the settlement of historical frequency fees, a five-year licence extension and the addition of optical fibre to the existing licence conditions.

Meanwhile, as part of the ongoing review of its portfolio, MTN decided to dispose of its 100% stake in MTN Cyprus for €260-million – about R4.17-billion.

“MTN Cyprus is MTN’s only operating business in the EU and falls outside our core footprint of Africa and the Middle East. We expect the sale to close within the third quarter of 2018,” he says.

Listings

MTN also launched the initial public offering (IPO) of MTN Ghana and made progress on the IPO of MTN Nigeria.

On May 29, MTN Ghana launched its IPO to introduce a broad base of Ghanaians as investors to fulfil a requirement of its 4G licence.

The offer period closed on July 31.

“Potential investors could apply for shares using MTN Mobile Money – the first mobile financial services platform to be used for an IPO,” Shuter comments.

MTN Ghana is expected to list on the Ghana Stock Exchange by September 5, subject to final regulatory and corporate approvals.

MTN Nigeria expects to list on the Nigerian Stock Exchange before the end of 2018, also subject to regulatory approvals and appropriate market conditions.