MTN faces the risk of not being able to repatriate about R4.6bn from Iran if US President Donald Trump persuades his allies in Europe to reimpose sanctions on the Middle Eastern nation.
MTN has been in discussions with Iran’s central bank to repatriate the remaining €300m in legacy cash that is stuck in that country, though those efforts could be scuppered if the US, UK and Europe pull out of the 2015 Iran nuclear deal. A decision is due to be announced on May 12.
If the US withdraws but does not convince the EU to do the same, MTN will still be able to repatriate Iranian funds by exchanging them for euros and then rands.
But a "worst-case scenario" would be for MTN’s Iranian business to be shut off from both European and US financial institutions as this would lock in MTN’s funding, MTN chief financial officer Ralph Mupita told investors on Thursday.
"But we think there will be something less than that negotiated in and around the twelfth [May 12]," Mupita said.
In April the Iranian government announced a single currency rate of 42,000 rials to the US dollar, an effective 11.4% decline in the central bank rate.
"Any transaction we do now would be at the 42,000 [rials] level and we did move some money last week at 42,000 [rials]," Mupita said. MTN Irancell moved €30m back to the group in the first quarter.
Mergence Investment Managers portfolio manager Peter Takaendesa said concern about Iran, which had already dented MTN’s share price, had been partly tempered by the fact that MTN would receive funds from the listings of its businesses in Ghana and Nigeria.
Sanctions on Iran would lift the oil price, which would be a boon for MTN’s largest business, its Nigerian operation, Takaendesa said.
Excelsia Capital analyst Mark Narramore said Iran "is probably the biggest foreign exchange risk across the group".
If Irancell’s dividends were trapped in that country, that could weigh on MTN’s dividends at a group level, though the dividend would be partly protected by a recovery in Nigeria, Narramore said.
It appeared as though "the worst is over in Nigeria", where the local currency had stabilised with the oil price, he added.
Partly because of that, Narramore said "MTN’s earnings growth profile is probably looking better than most of its emerging market telco peers".
MTN said on Thursday its service revenue in Nigeria grew faster than inflation in the three months to March — the first time in a number of reporting periods. MTN Nigeria’s service revenues rose 14.4% compared with that of a year before, and margins also rose.
Group service revenue increased 9.1%.
MTN CEO Rob Shuter said the group had largely resolved a dispute with Benin.
MTN had agreed to pay frequency fees for 2016 and 2017 of $126m and extended its licence by five years. Further, a fibre-in-the-loop agreement had been added to MTN’s licence conditions. "I think that it is a decent resolution to a difficult situation," Shuter said.