Turkcell files against MTN over Iran

Yesterday Turkcell filed a lawsuit against MTN in the Washington Federal court attaching documents that throw a lot of very extreme allegations towards the telecommunications company whose public relations have been squeaky clean up until now. Now, I am not an investigative journalist so I don't have the time to follow up on all the leads of what seems to be a massive scandal with much finger pointing and dirty deeds involved. Mandy Weiner could write a book on it.

Fortunately there are investigative journalists who have already done some research from which I can start forming an opinion. This Bloomberg article summarises what Turkcell had to say in their files, I suggest you give it a read and you will see what I am talking about.

href="http://mg.co.za/article/2012-03-29-turkcell-sues-mtn-over-iran-contrac
ts" target="_blank">This Mail and Guardian article also does a good summary but doesn't say anything new. It does however state that "MTN was due to put out a SENS statement before markets opened on Thursday morning but a spokesperson said that they believed in the Hoffman inquiry to investigate the claims." Of course MTN released a SENS which we covered target="_blank">here when the allegations first came out in February.

As an analyst these kinds of things are tough to call. The truth is, we have no idea about the facts and who is right and who is wrong, that is why it is going to the courts. We can only speculate. What I can tell you is that it is certainly negative for MTN from a PR perspective. The share price is down 2% on the news so that is what the market thinks.

The other issue of concern is the U.S sanctions being imposed on Iran concerning their nuclear programme. As mentioned in the Bloomberg article, MTN have many ties with US companies which may halt services if MTN carry on operating there. This is certainly a worry because communication is such an important part of a countries operation these days.

Not only do MTN get 9% of their revenues from Iran but it forms a big part of their growth plans. I'd say that most of the bad news is factored into the MTN share price which looks extremely attractive on a valuations and a yield perspective. However, for the time being we would trade with caution on this one. We will keep a very close eye on the proceedings.