The MTN Group`s 49% share in IranCell will propel the operator into the global spotlight and make it more attractive to foreign investors, says an analyst.
The MTN Group today confirmed the conclusion of agreements to become the 49% shareholder in IranCell, a consortium that has been awarded the second GSM licence in the Islamic Republic of Iran.
MTN also confirmed the payment of a R2.35 billion (300 million euro) upfront fee for the GSM licence as required by that country`s minister of communications and IT.
"The ministry is in the process of issuing the licence to IranCell and a further announcement will be made in due course," says an MTN statement.
BMI-TechKnowledge telecoms analyst Richard Hurst says the finalisation of the IranCell deal is good news for MTN, as it opens up additional opportunities for further growth, allowing it to begin building its presence in other developing markets.
Hurst says there is great scope for growth in Iran, as the country has a large population of approximately 68 million and a gross domestic product per capita of about US$7 500.
"There are also an estimated 14.5 million fixed lines connected for a fixed teledensity of 21.3% and 4.3 million mobile subscribers for a teledensity of 6.3%," he says.
Strong competition
MTN`s entry into Iran is part of the group`s strategy to be "the leading mobile operator in developing markets". MTN has also stated that the Middle East is a natural extension of the group`s footprint in Africa.
However, the IranCell deal has been highly contested, with rival Turkcell initially awarded a 70% stake in IranCell last year.
That deal suffered a setback in February this year when the Iranian Parliament passed legislation reducing Turkcell`s shareholding from 70% to 49%. This was done as a result of a concern by hardliners who objected to giving a foreign company a majority stake in their telecommunications venture.
They argued that the network would be a threat to national security and could be used for espionage or be influenced by a foreign power.
Cultural differences
Hurst says one of the challenges MTN is likely to face doing business in Iran is that it is a culturally different landscape as compared to Africa.
"Iran comes with its own set of political and economic considerations in that it is currently under sanctions from the US and the government is considered to be an extremely conservative Islamic one."
He says MTN`s move into Iran will no doubt propel the operator into the global spotlight and could make it more attractive to foreign investors. He also suggests MTN will likely be extremely aggressive in this market.
"Much of the company`s future investments will go into the roll-out of the network in Iran," he says.
The MTN Group has withdrawn the cautionary announcement that was released on the Stock Exchange News Service on 19 September and 20 October in respect of its investment in IranCell.
The group will announce its interim results for the six months ended 30 September on Thursday, 24 November.
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