MTN has written off and abandoned its business in Syria after clashes with the government complicated its efforts to offload the unit, putting the spotlight on the complexity of profitably exiting unstable, war-torn countries for the company in the midst of sharpening its focus on Africa.
MTN, which has developed a reputation for conquering emerging-market countries that few dare to touch, is in the process of exiting businesses in the Middle East region — including Afghanistan, Yemen and Iran — as part of a five-year slim-down plan unveiled in 2019 to reduce risk, sell noncore assets such as towers and masts, and raise about R25bn.
But recent squabbles in Syria, the first of these operations on the chopping block, have resulted in the Johannesburg group abandoning its business in that country, underlining the headaches the group has faced in the region.
“It’s become intolerable to operate in Syria,” group CEO Ralph Mupita said during a media briefing on Thursday.
In February, the Syrian operation was placed under curatorship as authorities in that country accused the MTN subsidiary of mismanagement and violation of its operating licence conditions.
This effectively took operational control of the business away from MTN.
“The actions of the authorities were, with respect, unfounded and unnecessary and ... violated our own rights as a company,” Mupita told Business Day.
“On that basis, we’ve decided to abandon the operation, reserving our right to seek legal recourse.”
MTN began operating in Syria in 2006, with the unit contributing a mere 0.4% to group revenue of more than R80bn.
The group plans to leave the Middle East in two phases, first leaving Syria, Afghanistan and Yemen, before Iran will be let go in the second.
With the Syrian business now tossed aside, could a similar situation occur in the other Middle East businesses? For now, Mupita said, it is unlikely.
“There’s no similar situation in the other two markets but we’re going to continue to monitor those. We would prefer orderly exits. We can’t predict what will happen in the future, but that’s what we are aiming for.”
The decision seems to make sense for investors as well.
“Syria reached a point where it is no longer worth continuing in that market. MTN hasn’t been able to repatriate dividends from Syria for some time,” said David Lerche, head of equities at Sanlam Private Wealth.
Regarding the other Middle Eastern markets, Lerche said each had its own nuances, “but I would expect orderly exits from Yemen and Afghanistan in time, although the prices that MTN receives may not be great. The market places little value on these markets anyway.”
While leaving the Middle East, the group has decided not to enter Ethiopia’s recently liberalised market after losing a licence bid to Vodacom and its affiliate, Safaricom.
Mupita says it would not be worth trailing behind as a number three player in a country where the state-run Ethio Telecom has had a monopoly for decades.
This comes as the group reported headline earnings per share dropped 10% to R3.87 for the half-year to June, affected by non-operational items that included Covid-19 donations to the AU for vaccines and the Coalition Against Covid-19 in Nigeria. Excluding these items, adjusted headline earnings per share increased 31.5%.
Group service revenue rose 19.7% to R81.9bn, led by growth of 9.3% in MTN SA, 23.8% in MTN Nigeria and 25.5% in MTN Ghana.
Data revenue expanded 32.2% on the back of a 56.4% increase in data usage, with sustained levels of online demand brought about by the effects of the pandemic.
MTN had a total of 277-million subscribers during the review period, spread across 21 markets in Africa, which it considers a growth engine.
Shares in MTN were 4.12% up on Thursday at R120, their highest close since May 2018.
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