South Africa’s MTN sees strong growth in Iran despite sanctions

South Africa's MTN Group says its business prospects in Iran - the second-biggest market by subscribers - are still robust despite US sanctions and the fallout from the coronavirus outbreak.

Iran’s lack of access to the global financial network as a result of the sanctions has made it difficult for international companies to carry out normal business with the Islamic Republic.

For MTN, taking money out of Iran is a major challenge, the Johannesburg-based company’s Chief Financial Officer Ralph Mupita told Bloomberg on Wednesday.

However, the company has come up with a novel solution: it allows its Iranian unit, Irancell, to convert earnings into loans from MTN rather than send them to the parent company.

“This has placed MTN Irancell in a position where it has enough cash to continue funding its network expansion, even during these tough times,” Mupita said.

Africa’s biggest wireless networks group is now facing another unforeseen challenge in the form of the fast spreading coronavirus.

Iran has emerged as one of the hotspots of the disease, where the total number of infected people across the country reached 17,361 on Wednesday.

According to a health ministry official, Iran’s death toll from the coronavirus climbed to 1,135 with 147 new deaths in the past 24 hours.

Mupita said his company has implemented work-from-home measures and temperature screenings at its office locations.

“All international travel is banned, and we are busy implementing efforts to reduce domestic travel where possible,” he said.

MTN has a 49 percent stake in national operator Irancell. The company reportedly put on hold a $750 million expansion plan in the Iranian broadband market in the face of US sanctions in 2018.

MTN to invest $1.1bn in Iran fiber optic project

Iran says South Africa’s MTN Group will invest in an ambitious fiber optic internet connectivity project which will be launched in eight major cities.

It had sought to buy a 49 percent stake in fixed line broadband network, Iranian Net, and invest in both equity and loans to help the Iranian company develop a fiber network in eight of the country’s main cities in order to provide high-speed broadband.  

But the wireless carrier decided to shelve the plan because of looming US sanctions, reports said at the time.

Nevertheless, MTN has capitalized on strong growth in the Iranian telecoms market - where it had 43 million subscribers at the end of 2017 - to build an unassailable business jurisdiction.

Following the lifting of sanctions on Iran in early 2017, the company was allowed to repatriate $1 billion in accumulated dividends from its stake in Irancell.

For its entry into Iran in 2005, the company found favor with Iranian authorities who wrote off Turkcell to grant a $4.2 billion contract to MTN, angering the Turkish mobile phone company.

MTN’s new Chief Executive Officer Rob Shuter has vowed to abandon or sell markets that the company sees as prone to trouble and risk not worth it, but Iran’s size has persuaded him to stay put and try to see out the current impasse.

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