MTN shares hit by Turkcell suit

2012-02-04 13:24

Telecoms giant alleged to have bribed officials to secure Iran deal

MTN had no “budget for bomb shelters”, quipped former MTN chief executive Phuthuma Nhleko at a results presentation in 2006 in response to questions about the controversial entry into Iran by the cellphone network operator.

Now the political risk associated with the decision to enter the Islamic republic has manifested in the form of a possible court action, in which the telecoms giant is alleged to have bribed Iranian and South African government officials to secure the Irancell licence over Turkish telecoms group Turkcell in 2005.

The alleged bribes were paid during the tenure of Nhleko as chief executive and group president, and Irene Charnley as group executive of the Middle East and North Africa division, which drove the foray into Iran.

The two have since left MTN, but are most likely to be called in to testify before a special committee of the board set up by MTN chairperson Cyril Ramaphosa under Cape Town born, retired British judge Leonard Hoffmann, who famously presided over a matter involving former Chilean dictator Augusto Pinochet.

Ramaphosa said this would “ensure the integrity and independence of the investigation”.

“Irrespective of the validity of Turkcell’s claims, the very fact that such allegations have been made is serious. MTN has zero tolerance for corrupt and unethical business practices. The MTN board has decided to set up a special committee to consider these allegations and to recommend appropriate action,” said Ramaphosa.

A statement by MTN said this week that Turkcell would also claim that MTN encouraged the South African government to take a favourable position toward Iran’s civil nuclear power development programme at a meeting of the International Atomic Energy Agency in November 2005.

Turkcell will allege that MTN enlisted South African govern-ment support for the provision of military equipment to Iran.

However, Clayson Monyela, foreign ministry spokesperson, said the South Africa government did not want to respond to “rumours and untested allegations”.

“This is a matter between MTN and that company (Turkcell). South Africa’s foreign policy is independent and not influenced by anyone,” Monyela said.

The claims by Turkcell could complicate relations between South Africa and Western powers, which want to ensure that Iran does not acquire a nuclear bomb.

Jakkie Cilliers, executive director of the Institute for Security Studies, speculated that this could be part of “dirty tricks” to force South Africa to take a “hardline stance” on Iran.

“I am speculating that South Africa has always been cautious about pressure being applied on Iran on the nuclear arms issue. South Africa believes there is no proof that Iran is seeking to acquire a nuclear bomb.

It also believes that the International Atomic Energy Agency is being manipulated by the West,” Cilliers said.

At the time of going to press MTN shares had taken a 4% plunge on the JSE. Irancell (also known as MTN Iran) contributes approximately 9% of profit to MTN revenues.

At the height of the struggle for new markets by mobile telecom operators in search of expanding customer bases and topline performance in 2004 and 2005, Charnley and her team went to Iran.

She led a more than R6.8-billion roll-out of base stations and other infrastructure improvements. MTN’s Iranian acquisition became part of its Middle East and North Africa region.

The region was made up of Irancell, MTN Syria, MTN Sudan, MTN Yemen, MTN Afghanistan and MTN Cyprus.

Iran is MTN’s second-largest market as it has 33.3 million subscribers after Nigeria, accounting for about 9% of first-half sales and 8% of earnings before interest, tax, depreciation and amortisation.

The MTN statement issued by Ramaphosa this week said Turkcell, which was unsuccessful in its bid for the Iranian licence, was planning to take legal action in a US court.

It was alleged by Turkcell that in approximately 2004 and 2005, in an effort for MTN to win the bid, inappropriate payments were made.

A Turkcell spokesperson said they were baffled as to why MTN had made any statements because the parties were still involved in an arbitration process.

The purpose of the process was to allow Turkcell to recoup losses as a result of the licence being awarded to the MTN consortium.

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