MTN Group shares suffer big fall as Iranian subsidiary embroiled in anti government protest

MTN Group’s shares suffered their biggest fall in five months on Friday, about 4%, on news the CEO of the company’s subsidiary MTN Irancell had been ousted, embroiling the JSE-listed group in ongoing protest action in Iran.

This, and other headaches around this operation underscore the group’s ongoing push to exit the Middle Eastern country.

Earlier in the week, the Fars news agency reported Alireza Rafiei had been dismissed as CEO for failing to comply with the Iranian government’s decision to shut down communications.

MTN did not respond when contacted for comment.

Business Day understands the instruction had been to close the local switch, which would effectively shut down local calls. This happened during the recent protests in Iran.

The instruction was unprecedented, as previously Iranian authorities have shut down international communication gateways through a central control system. However, this time the instruction, apparently, was to disable local traffic, which is controlled by the telecoms providers.

Shares in MTN closed 3.99% weaker on Friday at R176.18, halting momentum that saw the stock rise more than 80% last year, and 3.94% so far this month.

MTN is disputing Rafiei’s dismissal due to governance processes not being followed. At the heart of the dispute is MTN’s 49% minority investment in Irancell.

As a minority shareholder, MTN does not participate in Irancell’s operational decisions and had not been made aware, until recently, of the dismissal, putting Africa’s largest mobile provider at odds with the majority shareholders in the company.

The group’s plan to leave the country has been hampered by US sanctions.

MTN, which had developed a reputation for conquering emerging-market countries that few dared touch, has also been exiting its businesses in the Middle East — Afghanistan, Syria, Yemen and Iran — as part of its five-year, slim-down plan, Ambition 2025, unveiled in 2019 to reduce risk, sell noncore assets such as towers and masts, and raise about R25bn.

Only Iran remains in the portfolio.

The existence of US sanctions, including the exclusion of Iran from the international money transfer system SWIFT, mean MTN’s investment in Iran is effectively frozen.

Group CEO Ralph Mupita has said if conditions allowed for an exit, MTN would do so, focusing its efforts on opportunities in Africa.

Business Day understands that over the past three years, Mupita has met with a number of potential suitors in the Middle East to exit the Iran operation.

Those interested parties have cited the sanctions as a major hurdle to any such deal.

MTN is also facing legal troubles around its initial entry into Iran.

Turkcell accuses MTN of paying bribes to SA and Iranian officials to secure 49% of Irancell Telecommunications Services in 2005, which gave it a licence to operate in the country.

Turkcell is demanding $4.2bn in damages, plus interest, based on profit it said it could have made had it been able to keep the licence.

MTN has denied the charges.

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