UPDATED: MTN Slumps with $256 mln cash stucked in Iran over U.S sanctions as H1 profit dip 7%

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    * On course to pay 500 cents per share dividend in FY 2018

    * Company may struggle to repatriate $256 mln from Iran

    By Tiisetso Motsoeneng

    JOHANNESBURG, Aug 8 – MTN Group, Africa’s biggest mobile operator, is sticking to its 2018 dividend target despite new U.S. sanctions making it harder to repatriate cash from its Iran joint venture, the company said on Wednesday.

    MTN, which reported a 7 percent drop in half-year profits on Wednesday, has around 3.4 billion rand ($256 million) in accumulated dividends and loans from its joint venture in Iran.

    Sanctions imposed on Tehran by the United States this week have already led banks and many companies around the world to scale back dealings with Iran.

    Companies doing business with Iran will be barred from the United States, President Donald Trump said on Tuesday.

    “The sanctions may limit the ability of the group to repatriate cash from MTN Irancell, including future dividends,” the company said in an earnings report.

    In March, MTN cut its 2018 dividend to reduce debt but said it aimed to increase payouts by 10 to 20 percent over the next three to five years, lifting sentiment in the firm which some investors had expected to scrap this year’s payout.

    MTN said on Wednesday that it stood by this plan.

    “Despite continued challenges in repatriating funds from MTN Irancell, the board remains committed to plans to declare a total dividend of 500 cents per share for 2018,” Chief Executive Rob Shuter said on a conference call.

    The company declared a dividend of 175 cents per share in the first six months of the year, meaning it would have to pay 325 cents to reach in second-half of the year to hit the target.

    MTN said headline EPS, the primary measure of profit in South Africa that excludes certain one-off items, fell 7 percent to 215 cents in the six months through June due to unfavourable currency swings as well as a lower contribution from joint ventures and associates.

    Those contributions dropped by a hefty 66 percent to 197 million rand, mainly due to a drop in the contribution from MTN Irancell and a widening loss at its e-commerce joint venture, Africa Internet Holdings.

    In addition to its 49 percent stake in Irancell, MTN said in May last year it had agreed to invest more than $295 million in Iranian Net, a fixed line broadband network in which it planned to buy an initial 49 percent stake.

    MTN said its MTN Nigeria unit expected to list on the Nigerian Stock Exchange before the end of 2018.

    According to pre-IPO documents seen by Reuters in February, the telecoms firm planned to raise at least $400 million to cut debt for its Nigeria unit, then valued at $5.23 billion.

    GROWTH BLUEPRINT
    MTN is seen as one of post-apartheid South Africa’s biggest commercial successes, but clashes with regulators in recent years have hobbled its growth.

    It appointed Shuter about a year ago to put it back on growth trajectory. He has drawn up a new growth blueprint that includes branching out of basic telecoms services into music streaming, mobile banking and e-commerce and is reviewing the company’s presence in markets where it is not a major player.

    MTN sold its tiny Cypriot business last month for 4 billion rand ($301 million) to Monaco Telecom, sparking vague talk that other smaller businesses in Liberia, Guinea and Guinea-Bissau were next on the chopping block.

    “We want to be a high-growth geography but we also need a decent regulatory environment, (a) stable trading environment. This means for example some of these markets in the more war-torn areas will always be under review,” Shuter said.
    His comments would likely put the spotlight on Syria and South Sudan, both of which have been gripped by civil war in recent years.

    Ethiopia Opportunity
    MTN is reviewing its portfolio across the Middle East and Africa even after selling the Cyprus business. The examination is ongoing, with conflict markets including Syria and South Sudan under scrutiny. As well as disposals, MTN is keen to enter new markets such as Angola and Ethiopia — which have both recently indicated they are open to foreign investors.

    “We want to be number one or two in the markets that we are operating in,” Chief Executive Officer Rob Shuter said by phone. “We need a decent regulatory environment to operate in. All war-torn areas will always be under review.”

    MTN’s subscriber numbers increased by 2.8 percent to 223.4 million as of end June, while headline earnings per share declined to 2.15 rand from 2.31 rand. The Earnings before interest, taxes, depreciation and amortization margin is expected to widen over the next few years and service revenue will increase by upper-single-digit percentage points, it said.

    MTN reiterated a pledge to increase dividends by as much as 20 percent a year over the medium term. The full-year payout to shareholders will be 5 rand a share in 2018, compared with 7 rand last year, the company said.

    ($1 = 13.3034 rand) (Reporting by Tiisetso Motsoeneng Editing by Ed Stoddard and Adrian Croft)

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