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Thu 6 Aug 2020 03:54 PM

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Africa's largest wireless carrier MTN to sell Middle East units

The disposals will be done in a phased manner, with its three consolidated subsidiaries in Yemen, Afghanistan and Syria earmarked to be sold first

Africa's largest wireless carrier MTN to sell Middle East units

In the medium term the group will also dispose of its 49% stake in MTN Irancell, one of its largest markets.

MTN Group Ltd. plans to exit the Middle East as Africa’s biggest wireless carrier changes focus to its home continent.

The Middle East “environment is becoming increasingly complex and it contributes less to the group’s earnings,” Chief Executive Officer Rob Shuter said Thursday.

The South African operator is used to working in certain risky markets, which in some instances has left it vulnerable to legal entanglements, unpredictable politics and regulatory crackdowns. In Iran, the company has been involved in a years-long legal battle over a telecom license, although no claims have succeeded. In Afghanistan, MTN moved to get claims dismissed that it was involved with payments to the Taliban to protect its infrastructure.

While this adds to the complexity of operating in these markets, the real issue is the economics of the businesses, Shuter said in an interview.

“We used to say that the conflict markets were not consuming any of our capital and could still be good contributers if the situation turned around,” he said. Due to currency devaluations “they have become small in our lives, but it could be significant in the hand of another company,” he said.

Phased disposal

The disposals will be done in a phased manner, with its three consolidated subsidiaries in Yemen, Afghanistan and Syria earmarked to be sold first. These markets only contribute about 4% to the group’s earnings before interest, depreciation, taxation and amortisation, said Shuter on a call with reporters. Talks to sell the 75% shareholding in MTN Syria are advanced, he said.

In the medium term the group will also dispose of its 49% stake in MTN Irancell, one of its largest markets. The disposal will take three to five years, “so it will not be a fire-sale process,” Shuter said. Exiting the entire Middle East portfolio will leave MTN with 17 markets in Africa.

MTN has been on a drive to dispose of assets to generate cash to reduce debt. It has managed to make 15 billion rand ($867 million) with disposals and aims to realise a further 25 billion rand over the next three to five years, the group said as it reported first-half results on Thursday.

Adjusted earnings per share for the six months through June were up 121% at 4.30 rand.

The shares were 1% down at 59.53 rand by 2:53 p.m. in Johannesburg on Thursday, valuing the company at 112 billion rand.

The Johannesburg-based company is also evaluating its stake in Jumia Technologies and IHS Towers, said Shuter, who will step down in March. His successor is still to be announced.

“We have been aiming for a sensible evolution and continuation of the strategy that we have been working on in the past few years, while making space for the incoming CEO to make their own mark in terms of how they want to position the company,” said Shuter.

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