Champagne on ice at Iran-invested MTN

INTERNATIONAL diplomacy this week pushed one country closer to an abyss and brought another in from the wilderness, leaving a former pariah to take its place as a dominant power in its region.

That is the story of Greece and Iran: one a hollow victory, the other the awakening of a sleeping giant in the Middle East, a new frontier market.

We are still not too sure what the end game will be in the EU as Germany struggles to rein in its errant southern neighbours.

And we do not yet know the repercussions for us in South Africa.

Let’s hope for a swift return of strong, sustainable global growth to paint over the cracks.

The Iranian breakthrough is more positive as it essentially unleashes the potential of the second-largest oil producer in the Middle East, which has the region’s largest educated middle class.

Long-term shareholders in cellular operator MTN, and the executive team led by its former CEO, Phuthuma Nhleko, must be feeling somewhat vindicated for sticking with the investment they made in that country some 10 years go.

Much like the operator’s initial entry into Nigeria attracted much criticism from some quarters in the investment world and financial press, MTN’s foray into Iran puzzled many observers.

Lightning-quick growth in Africa’s most populous country quickly shut down detractors of the west African expansion, which is now MTN’s biggest operation.

However, it has not proven as easy for the cellular network provider to shake off the risk tag associated with its $400-million (R2.5-billion at the average exchange rate when it made the move in 2005) Iranian bet.

Back then, the nuclear energy furore had not reached the levels experienced in recent years, which led the US and UN to slap debilitating sanctions on the country.

The investment was further muddied in 2011 when MTN was sued by Turkcell, the losing bidder for the Iranian operating licence, for allegedly peddling political influence to win the bidding.

An independent commission headed by a UK judge eventually found the allegations to be baseless.

That saga, combined with the tensions between the West and Iran, heightened international and local pressure through the Democratic Alliance for MTN to exit its investment.

Having withstood the pressure, shareholders in MTN will, some 10 years on, enjoy the full advantage of being the first mover in what — next to Ethiopia and a few other regions — must be considered the holy grail for multinationals looking for high-growth markets.

There are two immediate dividends should sanctions be lifted in about 60 days:

An appreciating Iranian currency will feed into higher revenue and profits for the business, which makes up about 10% of MTN’s total net profit; and

MTN can repatriate $1.2billion (R14.9-billion) in cash trapped in that country.

That amounts to a lot more than the market capitalisation of Portuguese operator Portugal Telecom, which has a foot in another prized mobile market — Angola. (But that is just my speculation.)

MTN had R43-billion in cash at the end of last year.

We are on the verge of seeing yet another gamble by MTN paying off.

Should the sanctions be lifted, the company, so mired in its local and Nigerian struggles, will get some deserved rewards.

The only obstacle looks to be the Republicans in the US.

MTN will be hoping the party does not reclaim the White House next year.

An appreciating Iranian currency will feed into higher revenue