August 7, 2014 5:51 pm

MTN presses ahead with plans for 20-year licence in Syria

The dome of a mosque is seen amongst satellite dishes on the rooftops of home and apartment blocks in the Syrian capital Damascus, on June 26, 2013. AFP PHOTO / LOUAI BESHARA (Photo credit should read LOUAI BESHARA/AFP/Getty Images)©AFP

Syria's capital Damascus

MTN is pressing ahead with plans to acquire a 20-year mobile phone licence in Syria, in spite of the four-year civil conflict in the Arab nation that has seen thousands killed.

Africa’s biggest mobile phone operator said it had made “significant progress” in converting its current “build, operate and transfer” (BOT) contract in Syria into a full-operation licence.

It will pay an initial licence fee of between S£18bn ($120m) and S£25bn ($168m), which equates to about a year’s worth of the revenue it currently pays to the Syrian government under its BOT arrangement.

MTN will fund the licence out of the $250m of dividends that it has been unable to repatriate from the war-ravaged nation. This is partly because legislation to transfer these funds does not exist in Syria, but mainly because of a shortage of foreign currency. MTN expects to conclude the licence deal before the end of the year.

Established in 2007, MTN Syria is one of two mobile operators in the country, and has about 5.7m subscribers. The other is Syriatel, which is owned by Rami Makhlouf, one of the Syria’s top businessman.

Since the outbreak of the civil conflict, the Syrian authorities have at times closed transmission networks and up to half of MTN’s sites have not functioned for various reasons.

However, Sifiso Dabengwa, MTN’s chief executive, has always insisted the company has no regrets about entering the market, and has argued that mobile communications can be a force for good in unstable countries by allowing people to communicate.

“It would be a 20-year license and I guess the reality is that the problems that they [Syrians] are having now would come to an end,” Mr Dabengwa said on Thursday.

He added: “The only response I have heard from our shareholders [about the Syrian licence] is a little bit on the positive side in the sense there is meaningful use for the cash that is in the country.”

MTN said it could look to increase its investment in Syria, once it has secured the licence. “Because of the BOT, we haven’t been investing actively in Syria for quite a while, so once we’ve got that actual licence the capex will increase in that operation and we will probably use the balance of the [$250m in Syria] cash for capex,” said Brett Goschen, the group’s chief financial officer.

Established in 1994, the year South Africa held its first democratic election, MTN has grown rapidly into one of the country’s most successful companies by entering frontier markets, and it now has more than 251m subscribers across 22 countries.

The only response I have heard from our shareholders [about the Syrian licence] is a little bit on the positive side in the sense there is meaningful use for the cash that is in the country

- Sifiso Dabengwa, MTN chief executive

But its expanding footprint – from Afghanistan to Benin – has also brought its own challenges and, at times, controversies.

The telecoms group has been accused in lawsuits by rival Turkcell of using corruption to win its mobile licence in Iran, while sanctions have prevented it repatriating about $900m in loans and dividends from the Islamic republic. MTN has vehemently denied Turkcell’s allegations.

MTN said it was working with sanctions authorities and Iran to find a means to repatriate the funds from its Iranian operation, Irancell, in which it has a 49 per cent stake.

Announcing its results for the six months to June, MTN also said it was in advanced negotiations to sell more than 9,000 towers in Nigeria to an “entity managed by a large mobile telecommunications infrastructure provider”.

MTN said its profits for the first half of the year increased 9 per cent, while its revenue was up 10.7 per cent to R73bn ($7bn)

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