MTN has R880 million trapped by US sanctions

MTN surged the most since March after Africa’s biggest mobile-network operator said it will buy back R6 billion of shares.

It also reaffirmed its three- to five-year revenue and capital guidance, even as writedowns at its Iranian joint venture weighed on earnings.

The stock climbed as much as 5.2% and traded 3.5% higher at 9:24 a.m. in Johannesburg.

Profit attributable to shareholders dropped 25% to R7.41 billion in the six months ended June 30 due to an impairment of its investment in Irancell and foreign-exchange losses in South Sudan.

“Post the devaluation, the total dividend left in Iran is about R880 million, equivalent to trapped dividends,” CEO Ralph Mupita said in an interview.

“With the sanctions in place, we cannot put any money in or out. If the situation did change, where there was a removal of sanctions, we would continue with executing our Middle East exit strategy.”

US sanctions against Iran — in place since May 2018 — have stymied MTN’s efforts to sell its 49% stake in its venture in the nation.

The conflict that broke out on 28 February has further hindered the plan, requiring the non-cash writedown. 

Adjusted headline earnings, which MTN considers a better reflection of its operating performance, climbed 21%. 

While MTN’s business in Iran has taken a hit and South Africa has slowed, profit at the company’s units in Nigeria, its biggest market with about 81 million subscribers, Ghana, and Uganda are surging.

The carrier said it sees group-service revenue growth of at least the high teens and a return on capital employed of 20%- plus to low 30% over the medium term.

While group service-revenue growth moderated in the first half, the company sees it accelerating over the next six months as airtime lending in Nigeria normalises and its prepaid business in South Africa returns to growth. 

MTN’s share-buyback plan opens today and will continue for as long as it “remains value-accretive” to shareholders.

The firm also plans to sell up to 30% of its IHS tower investment in Nigeria.