MTN under fire at home as Turkcell lawsuit revealed

MTN under fire at home as Turkcell lawsuit revealed

This April 5 file photo shows employees at an MTN shop in Johannesburg. The South African telecom giant is facing growing criticism at home following alleged unfair competition against rival Turkcell in the Iranian market. (PHOTO SUNDAY’S ZAMAN)

April 08, 2012, Sunday/ 14:25:00

south african telecom giant mtn faces increasing criticism at home over the lawsuit filed against it by Turkish mobile phone operator Turkcell a week ago.

Various South African political parties, civil society groups and business leaders have called on the South African government to investigate the claims and allegations made by Turkcell against the MTN Group. The Democratic Alliance (DA), the official opposition in Parliament, has called on MTN to release all records and documents with regards to its dealings with Iran. The political party is set to submit a request to access copies of the records of MTN’s Iran dealings in line with the Promotion of Access to Information Act. “If the MTN Group has nothing to hide, the company should have no problem handing over copies of the records relating to its business dealings in Iran,” said DA MP David Maynier. Maynier added that based on the allegations made in the court documents against MTN and its dealings with the Iranian electronics firm, Sairan, which owns 51 percent of Irancell, the South African company provided the Iranian government with “eavesdropping technology.”

“I am concerned that in possibly facilitating the surveillance of the political opposition, the MTN Group may directly or indirectly be responsible for the violation of human rights in Iran,” Maynier said. He indicated that he will be personally writing to MTN Chief Executive Officer Sifiso Dabengwa, requesting that MTN provide all necessary information and records on its dealings with Iran. Furthermore, the DA has called upon the Public Prosecutor’s Office and the elite white collar crime fighting unit, The Hawks, to investigate the serious allegations made by Turkcell against MTN. Earlier this week, the South African Human Rights Commission said that it had received a request to investigate MTN for human rights violations in Iran. In its defense, the MTN Group highlighted that it always “seeks to ensure that our corporate value of respect for human rights is reflected in the way we do business.”

MTN also noted that South Africa does not have any sanctions, embargos or diplomatic disputes with Iran and that their business dealings with the Iranian government, Sairan and Irancell are above board and legal. In response to these allegations made by Turkcell in the court documents, MTN dismissed the claims, saying that they hold “no legal merit” and that it will oppose the financial liability claim put forward by Turkcell, which amounts to $4.2 billion. Since the allegations were made, MTN set up its own investigation committee headed by Lord Leonard Hoffmann, a British-based legal scholar, to probe these allegations of bribery and corruption.

MTN has noted that the Hoffmann Committee formally invited Turkcell to participate in the investigative proceeding, which the Turkish company has not done. At the center of the court documents is former MTN Chief Executive Officer Phuthuma Nhleko, who together with then MTN commercial director, Irene Charnley, and then Chief Operating Officer Sifiso Dabengwa (now CEO), were the architects of “Project Snooker.” In a statement released by the former CEO of the MTN Group, in light of the allegations against him, Nhleko said, “I can state quite categorically that during my tenure as group CEO of MTN, no bribes were authorized or paid by the MTN Group to any South African or Iranian government officials to secure the mobile license in Iran.” Nhleko openly denied having being involved in any bribery scandal or attempting to use his position or MTN to guide or manipulate South Africa’s foreign policy.

“MTN’s conduct was not unlawful or corrupt and MTN was certainly not in a position where it could influence or fetter the decisions made by the South African government or any other sovereign state,” explained Nhleko. Essentially, the Turkcell court documents, the authenticity of which has yet to be established, allege that MTN was involved in a bribery scandal involving senior politicians and diplomats from Iran and South Africa.

The court papers, attached memos and documents provide a detailed explanation of these allegations, which claim that bribes were paid to South Africa’s former ambassador to Iran, Yusuf Saloojee, and Iran’s Deputy Foreign Minister Javid Ghorbanoghli. In addition, it alleges that former South African Defense Minister Mosiuoa Lekota was to arrange high-tech weapons and arms from parastatal arms manufacturer Denel, as part of the deal. Furthermore, the allegations claim that in 2005 MTN paid for and arranged the visit of Iran’s nuclear chief, Hassan Rowhani, to South Africa and set up meetings between Rowhani and former President Thabo Mbeki.

This meeting reportedly led to South Africa abstaining from voting on Iran’s nuclear program at the International Atomic Energy Agency, as well as opening up doors for Iranian diplomats to gain access to South Africa’s nuclear envoy, Abdul Minty. Ultimately, the Turkish company has accused MTN of these “unprecedented corrupt acts,” which in return “harmed” Turkcell’s shareholders.

In the court papers, Turkcell said that MTN’s involvement with the Iranians blocked the Turkish company from completing its license contract agreements with the Islamic republic. In 2004 Turkcell was awarded a mobile phone operator license, which was won through an international tender process. The license deal was estimated to have been worth $31.6 billion in generated revenue over a 15-year period, while the license fee would amount to $380 million.

Turkcell explains in the court papers that soon after they were awarded the tender, MTN acquired a 49 percent stake in Irancell and carried out all the operational cost of its 51 percent share-holder, Sairan, through so called “shame-loans” or bribes. MTN’s acquisition of Irancell resulted in Turkcell losing out on the tender contract, which it had initially won.

Earlier this year, talks between MTN and Turkcell broke down, as the South African company claimed that Turkcell was trying to extort money from it. The South African telecommunications company has yet to formally respond to the allegations contained in the lawsuit filed against it in the United States. Since the lawsuit was filed by Turkcell, MTN has lost over 6 percent of its share price value on the Johannesburg Stock Exchange. The company also faces an internal management crisis, which has resulted in rifts among members of the board and the executive management structures. Last year MTN’s reported annual revenue was $15.57 billion. Reports have indicated that around 10 percent of the total revenue generated by MTN in 2011 came from business in Iran.

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