MTN prepares to exit from 'operationally complex' Middle East
JOHANNESBURG - Africa’s telecommunications giant MTN has flagged that it was selling its assets in the Middle East as part of a phased strategy to exit the region in the medium-term.
Chief executive Rob Shuter said MTN was in advanced discussions to sell its 75 percent stake in MTN Syria as part of the first step of exiting the Middle East region which included Syria, Yemen and Afghanistan.
Shuter said the Middle East assets contributed less than 4percent to group earnings before interest, taxes, depreciation, and amortisation in the first half of 2020. He said while MTN had a good positioning in the Middle East, the operating environment was complex. “We felt it would be better to focus our energy on the all Africa market which is closer to home, adding that the sale of the assets would be done responsibly. “It will not be a fire sale, it will be done in an orderly and responsible way,” said Shuter.
MTN has previously said that the prolonged war and conflicts were impacting Syria, Yemen, Afghanistan and making operations in these countries difficult.
Its Afghanistan operations also faced headwinds after following complaints in a US court in December that it had violated the Anti-Terrorism Act. The lawsuit was filed on behalf of Americans killed or wounded in Afghanistan between 2009 and 2017.
Peter Takaendesa, head of equities at Mergence Investment Managers, said MTN’s plans to exit the Middle East portfolio were a positive development, given macro and geopolitical tensions.
Takaendesa said the assets were now a much smaller contributor to the group and the management time required to deal with regulatory and geopolitical challenges in those regions was relatively larger compared to returns.
“It would have been much better to exit some of those operations in a strong oil price environment, but the geopolitical challenges have continued to make it challenging with some countries remaining under sanctions for extended periods,” said Takaendesa.
Old Mutual Investment Group analyst Ian Woodley said while the Middle East was generally profitable for MTN, it was a difficult region to work in. “The current disputed court case against MTN for its operations in Afghanistan demonstrates the additional difficulty that exposure to these areas brings. For the limited impact on profitability, management is probably wise to focus its attention on other areas,” said Woodley.
Chief financial officer Ralph Mupita confirmed the group was also planning to sell part or all of its interest in Jumia Technologies as Africa’s biggest e-retailer.
“We would consider at the appropriate time how much we could sell, we have not made a decision just yet.”
The possible sale of Jumia comes as MTN is selling non-core assets as part of its strategy “to reduce debt and drive future growth”.
Last March MTN launched its asset realisation programme (ARP) to realise R25 billion over three to five years.
The group said it had completed the first phase of its ARP programme to divest in non-core assets after selling its 49percent stake in the Ghana and Uganda tower associates for $524million (R9.06billion) during the six months to June.
Shuter said the Covid-19 pandemic and flux in global oil prices had brought major volatility in financial markets. “This has impacted our ability to continue with further realisations in the short-term,” he said.