MTN Group has decided to pull the plug on its operation in war-torn Syria after it lost control of the business. It has booked a loss of R4.7-billion on the “deconsolidation” of the subsidiary.
MTN Group President and CEO Ralph Mupita told TechCentral on Thursday that operating in the troubled Middle Eastern country had become “intolerable” and that the group was “reserving its rights” – and may use international legal frameworks to enforce those rights.
Mupita said efforts to sell the Syrian operation — previously announced as part of a group plan to exit its investments in the Middle East — had came to nought.
In notes accompanying the group’s financial results for the six months to June 2021, MTN said the administrative court of Damascus (Syria’s capital) placed MTN Syria under “judicial guardianship” in February. The court appointed the chairman of TeleInvest (the non-controlling shareholder in the business) as judicial guardian, with the responsibility of managing day-to-day operations.
“The appointment of the judicial guardian significantly reduced the group’s ability to direct relevant activities in MTN Syria and therefore the group lost control of the operation on this date (25 February 2021).”
“On loss of control, the group recognised its 75% shareholding in MTN Syria as a financial instrument at fair value. Given the appointment of the judicial guardian and the related shift of power from the majority shareholder to the judicial guardian, the fair value of the shares was determined to be negligible. Subsequently, the group has decided to initiate a process to exit Syria.”
MTN first invested in Syria 15 years ago, before a devastating civil war broke out in the country. The carrying value of the assets at the date of loss of control included R1.1-billion in property, plant and equipment and R508-million in trade receivables and other current assets. Cash of R228-million has been “derecognised”.
Mupita said Syria made up just 0.4% of the group’s total service revenue, and so the impact of the decision will be negligible in the bigger picture.