SENS Note - 22 June 2005

Prospects in Iran boost MTN’s growth hopes

Prospects in Iran boost MTN’s growth hopes Lesley Stones -------------------------------------------------------------------------------- E-Mail article Print-Friendly Information Technology Editor MTN might yet get a crack at entering the Middle East market after being invited back to talks with the Iranian government. MTN refused to walk away from Iran despite losing a bid for a second cellular network licence in February last year to the Turkish operator Turkcell. As Turkcell’s ill-ease with the $3bn licence conditions grew, MTN opened an office in Tehran specifically to chase Arabic opportunities and to show willingness to take over the Iranian licence if Turkcell walked away. Reports yesterday that the government had evicted Turkcell from the winning consortium showed that MTN’s doggedness had paid off. Turkcell told the Istanbul Stock Exchange it had not been informed of the decision, and said it may take legal action if Iran broke off negotiations. MTN needs to establish operations in other countries to have any chance of maintaining the revenue and profit growth achieved in the past few years. Iran’s telecommunications ministry says that the country has 5-million cellphone users in 851 cities. That gives it a penetration rate of 7,5% despite its relatively affluent population, creating a theoretically lucrative market. However, the Iranian licence has caused some disquiet among analysts, who worry that MTN’s quest for expansion may lead it to accept unfavourable conditions. Turkcell’s main grievance was the government’s summarily axing of its initial 70% stake in the consortium to a noncontrolling 49%, after belatedly ruling that foreigners cannot hold a majority in any investment. New terms also include surveillance of its operations by the intelligence ministry. Despite those conditions, Turkcell has hung on for several months trying to negotiate a satisfactory deal. Reuters yesterday quoted Masoum Fardis of the Iranian telecommunications ministry as saying talks were under way with MTN to replace Turkcell as the consortium’s foreign operator. \