A US sanction on countries like  Iran, Liberia, Syria and Sudan could come as a stumbling block to the MTN-Reliance Communication merger move.

To qualify for funding by US banks, the MTN group will have to spin off or demerge its businesses located in at least the four  countries were the US has imposed sanctions.

That could be a difficult proposition for MTN whose business in Iran is growing fast. At the end of last year, MTN had six million subscribers in Iran, about 9 per cent of its total customers, up from just 154,000 at the end of 2006. Revenue increased 1,642 per cent in the 12 months ended December to two per cent of overall revenue.

MTN also had 2.1 million customers in Sudan and 3.1 million customers in Syria as of December 2007. Sudan contributed two per cent of MTN's 2007 revenues, and Syria six per cent.

These markets are important for MTN as they constitute over 18 per cent of its total subscriber base and 25 per cent of its subscriber base outside South Africa. The four markets also contribute 11 per cent of MTN's revenues.

Reliance Communications, however, is not looking at raising debt to finance an acquisition of MTN. The Anil Ambani group company has been looking at some kind of a merger which could include swapping shares in each others company, avoiding the need for cash transactions.

MTN and Reliance Communications have already started talks in Johannesburg and have agreed to have "exclusivity" talks for the next 45 days.

Combining Reliance Communications and MTN Group would create a telecom giant with 115 million customers, more than most western mobile phone companies.

Reliance Communications is also in a strong financial position. The company reported a 71 per cent increase in net profit in the fiscal year ended 31 March 2008, at Rs5,400 crore ($1.35 billion).

Bharti Airtel, which abandoned merger talks with MTN, however, said in a statement that more than a dozen US and European bankers had given it "confident letters of funding" worth $60 billion.

Newspaper reports also said that Goldman Sachs and Standard Chartered had lined up about $12 billion in financing for the deal, although nothing has been confirmed.