MTN to edge out Turkcell in Iran.

Author:Ford, Neil

THE CONFLICT BETWEEN TELECOMS operator Turkcell and the Iranian government has been complicated by Tehran's apparent willingness to replace the Turkish company with MTN of South Africa. The Iranian government was confident it could inject some competition into the country's mobile sector when it awarded an operating licence to Turkcell in September 2004. However, Tehran's anger over perceived economic ties between Turkey and Israel seems to have resulted in a change of heart that looks likely to give the South African company its first stake in the Middle East.

In October 2005, MTN announced that it had paid $358m to an Iranian bank as its contribution towards the second Iranian mobile licence fee and added that it was in negotiations with the ministry of telecoms to take a 49% stake in the Irancell joint venture with Iranian interests. MTN originally lost out to Turkcell in the licensing tender. But although Turkcell is not definitely out of the running, MTN is now expected to replace the Turkish operator as the foreign investor in Irancell.

The Turkcell contract for the 15-year operating licence, which was renewable every five years, entitled it to a 70% stake. The Turkish firm won with a $385m bid, overcoming competition from other prominent Middle Eastern telecoms companies, such as Mobile Telecommunications Company of Kuwait and Orascom Telecom of Egypt. However, since conservative elements regained control of the Majlis, the Iranian parliament has awarded itself a veto on any foreign investment in the country with equity of over 49% in a single venture, effectively giving it the power to block the $3bn Turkcell agreement.

Moreover, since the licence was awarded Tehran has begun to criticise closer economic ties between Israel and Turkey, and has sought to reduce the influence of Turkish companies within Iran. For example, the Iranian army decided to close the new Khomeini International Airport just hours after it opened back in May 2004. The airport was built by TAV, an Austro-Turkish consortium and the military authorities argued that Turkey's links with Israel made TAV's control of the airport a threat to national security.

In February 2005, an Iranian parliamentary commission into the mobile licence concluded the Turkcell contract was another threat to security and demanded that the company's equity should be cut from 70% to 49%. In addition, other issues, including responsibility for paying the licence fee, caused Turkcell to come into conflict...

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