DEALTALK-U.S. banks tread warily around Bharti-MTN deal

* MTN-Bharti deal involves units in Iran, Sudan, Syria

* US limits firms from certain dealings in sanctioned areas

* Iran business growing significantly

* US officials say there is some room to tread carefully For more Reuters DEALTALKs, click [DEALTALK/]

By Michael Flaherty and David Lawder

HONG KONG/WASHINGTON, June 30 (Reuters) - A big jump in the number of mobile phone subscribers in Iran last quarter was welcome news for MTN Group (MTNJ.J), but potentially troublesome for U.S. banks eyeing a role in the South African telco's planned $20 billion-plus merger.

When MTN and India's Bharti Airtel (BRTI.BO) first discussed a tie-up more than a year ago, MTN had around 6 million users in Iran. Its business there, and in Sudan and Syria, has since grown -- a fact that has not escaped U.S. banks milling around the deal.

Nobody in Washington D.C. is saying publicly that U.S. banks should be barred from playing a role in the merger of the two emerging market telecom companies. Not yet, anyway.

But MTN's annual report says 13 percent of its 2008 revenues came from Iran, Sudan and Syria -- three states where the U.S. Treasury's Office of Foreign Assets Control (OFAC) sets tough restrictions on U.S. firms, effectively banning them from most direct and indirect dealings due to U.S. sanctions. (here)

The number of MTN's subscribers in Iran alone rose 14 percent to 18.2 million last quarter.

Bank of America-Merrill Lynch (BAC.N) is advising MTN on the deal, with Deutsche Bank (DBKGn.DE). Sources involved in the offer say Goldman Sachs (GS.N) is advising Bharti shareholder Singapore Telecommunications (STEL.SI), which owns 31 percent of the Indian company. Both BofA and Goldman declined to comment.

Several other U.S. banks are in talks to provide financing for the merger plan, sources say, which involves Bharti and MTN buying into each other to create the world's No.3 wireless group.

While US lenders would like a cut of the deal, sources at the banks say there is a lot of discussion at top levels to determine how to proceed within the boundaries of OFAC.

The sanctions were imposed by U.S. presidential orders over the years for a range of issues including attacks on Persian Gulf shipping, alleged state sponsorship of terrorism, assassinations and human rights violations.

A U.S. Treasury official declined to comment on the MTN-Bharti advisory work by U.S. banks, but said there was some room within OFAC rules for U.S. companies to deal cautiously with situations involving deals with foreign firms that have subsidiaries in the sanctioned areas -- as long as they are not facilitating transactions with the sanctioned countries.

"U.S. persons are not necessarily prohibited from dealing with third-country firms that do business in sanctioned countries, although they should approach such dealings carefully," said the official, who was not authorised to speak publicly about OFAC's enforcement of sanctions.