Mergers, Acquisitions and Financial Results

African cell phone operator MTN has agreed to take a stake in a $2 billion project to run Iran's second mobile firm which would give it a long-awaited foothold in the Middle East, it said on Thursday. But Iran said the hotly-contested deal had not been finalised and that only a court ruling would determine for sure whether MTN had muscled out rival Turkcell.

Analysts say Iran is a make-or-break deal for MTN, which has been scouring Africa and the Middle East for opportunities to expand its customer base beyond its key markets of South Africa and Nigeria, which are maturing fast.

Shares in MTN shot up as much as 6 percent, outperforming a firmer Johannesburg top-40 index, and were still trading up 2.7 percent by 1007 GMT. Shares in Turkcell gained 3 percent."On the face of it Iran is an awesome opportunity that will diversify their portfolio," said one South African fund manager, who manages a significant stake in MTN. "But we need clarity on the terms of the deal and on whether it is definitely going ahead -- and these issues should temper enthusiasm."MTN said in a statement it had concluded agreements with Irancell shareholders to take a 49 percent stake in the Iranian company, and had provided a 300 million euro ($358.4 million) payment guarantee towards a GSM licence.

The contract to act as foreign operator in the Irancell consortium for Iran's second mobile licence was originally awarded to Turkcell but Iran's telecommunications ministry and the domestic Irancell partners fell out with the Turkish firm over payment of a licence fee and started talks with MTN.Turkcell began court action on Oct. 16 to try to regain its Irancell stake and the outcome is viewed by foreign investors as a litmus test of investment risk in the Islamic republic.Iran's telecommunications ministry said a final announcement would not be made until the court rules on Turkcell's complaint."The ministry has not announced it yet. The court procedure with Turkcell is still going on," a ministry spokesman, who declined to be named, said in Tehran.

Turkcell said the MTN statement carried "no news.""They've been saying this for some time... The key thing is the court decision," said Irfan Unver, Turkcell's representative in Iran.Unver said he expected the court to rule in around 10 days on Turkcell's complaint that the ministry had broken the terms of the original tender by allowing Irancell to be formed without specifying the foreign operator and then negotiating with MTN.

Analysts say winning the Iran deal would give MTN access to a market with major growth potential and position it well for future expansion in the Middle East. But failure to clinch to licence may force it to scale back its global ambitions and return some of its growing cash pile to shareholders.

One analyst said last week a deal in Iran would prompt some brokers to raise their ratings on the stock, which some say is starting to look pricey compared to sector peers.But investors warned that even if MTN did win, the terms of the deal were still unclear and the investment case depended on what percentage of revenue MTN agreed to pay the government, and what portion of capital expenditure it would have to provide."Simplistically it is a positive deal, but we need more details on the revenue terms and on who is responsible for capex," said Gavin Joubert, portfolio manager at Coronation Fund Managers.