Turkey-Iran mobile deal 'at risk'

Turkey's investment in Iran's mobile industry looks set to be scrapped after its biggest mobile firm saw its investment there slashed by MPs.

Iran's parliament voted by a large majority to cut Turkcell's stake in a new mobile network from 70% to 49%. The move, which was justified on national security grounds, follows an earlier vote by MPs to give themselves a veto over foreign investments. Turkcell said the decision "increases the risks" attached to the project. Although the company's statement said it would continue to monitor developments, observers said they thought Turkcell was set to pull out of the $3bn deal. "The possibility of carrying out this project is next to zero," said Atinc Ozkan, analyst at Finans Investment in Istanbul. If Turkcell does back out, MTN - the South African firm which lost out in the original tender - may well be back in the running. The company has said it is prepared to accept a minority stake if Iran will award it the mobile deal.

Turkcell's mobile deal is the second Turkish investment in Iran to run into trouble. Turkish-Austrian consortium TAV was chosen to build and run Tehran's new Imam Khomeini International Airport - but the army closed it just hours after it opened in May 2004. In both cases, the justification has been national security, amid allegations that the Turkish firms are too close to Israel. The hardline posture taken by parliament, which is dominated by religious conservatives, could yet impact other inward investments.