MTN furthers ignominious Middle East exit with Yemen sale

MTN’s plans to back quietly out of its struggling Middle Eastern operations took a step forward this week when it announced the sale of its mobile business in Yemen.

The South Africa-based mobile group said it has transferred its majority stake in MTN Yemen to an entity known as Emerald International Investment, an affiliate of Omani conglomerate Zubair Corporation, its minor partner in the telco. According to its most recent annual report, MTN held an 83% stake in the Yemeni operation.

“The decision to exit Yemen was driven by a need to simplify the portfolio and focus our limited resources on executing a pan-African strategy,” said MTN Group President and CEO Ralph Mupita.

There was no comment on the value of the deal but, given that MTN had previously written down the value of its assets there, this may have been a simple handover. While MTN Yemen posted virtually flat revenues and earnings for full-year 2020, it accounted for just 1% of group revenues and the operating environment in the war-torn country is difficult, to say the least. Its contribution to group earnings in the first half of this year was 0.3%.

There should be a good growth opportunity in Yemen. According to MTN, mobile market penetration is just 43%. But if the macro-economic and political climate there precludes even a major regional mobile player like MTN from capitalising on it, then there’s no real opportunity for anyone at the moment.

“We would like to thank the 719 employees of MTN Yemen for their commitment over the years, and the 4.7 million subscribers of MTN Yemen for their custom and trust in the brand,” Mupita said. “We wish Emerald well in the next phase of development of this business as they work with the team that served MTN well over the years.”

It’s tough to imagine what the next phase of development will look like for MTN Yemen. Its 2G operating licence expires at the end of this year, and there is no clear plan for mobile services in the market as a whole.

For MTN, the Yemen exit is just part of a plan to pull out of the Middle East, which it announced in August 2020. That plan is starting to look like it essentially means the telco effectively abandoning some of its trickier businesses.

The telco group has pulled the plug on its time in Syria, having failed to finalise the sale of its 75% stake in MTN Syria which ended up being placed under judicial guardianship earlier this year. The value of the operation has declined to zero, leaving MTN little choice but to walk away. It is currently working on extricating itself from the market.

MTN’s Middle East operations also include wholly-owned MTN Afghanistan, which makes a similarly small contribution to the overall business. The telco says it is evaluating its options with regard to exiting that business, and there have been press rumours that sale talks are taking place. In September, for example, Bloomberg reported that MTN was holding discussions with a number of potential international buyers for the business.

MTN’s Iranian joint venture Irancell – it holds a 49% stake – also forms part of its Middle East division, but its future is less clear cut. The business is performing well and when it announced its Middle East exit last year MTN almost immediately issued a separate statement noting that it had “no immediate plans” to leave Iran.

Either way, it’s pretty clear that MTN now considers itself an African-focussed telco, and there is no shortage of growth opportunities in that market.