Turkcell vs MTN

2013-12-01 14:00

Operator now turns to SA courts to relaunch its fight over licence rights in Iran

Turkish mobile operator Turkcell has made good on its promise to find a new venue to sue MTN for R43?billion after filing court papers in Johannesburg this week.

Turkcell has levelled shocking claims against MTN which won the two-man race for an Iranian cellular licence in 2005.

A complaint was originally filed in the US, but was withdrawn earlier this year after an unrelated US judgment made it improbable for US courts to grant the case jurisdiction.

The case in Johannesburg levels the same claims based on testimony by MTN’s former fixer in Iran, Chris Kilowan.

These include that MTN allegedly used its executives’ political influence in South Africa to provide Iran with defence equipment and persuaded South Africa to abstain from voting on Iran’s nuclear programme at the International Atomic Energy Agency.

MTN is also alleged to have bribed Iranian officials, companies and South Africa’s ambassador to Iran at the time, Yusuf Saloojee.

The summons repeatedly stresses how important meetings in the alleged “corrupt scheme” were held in Johannesburg and Cape Town.

The eight counts against MTN presented in the US have been reduced to two.

Turkcell has abandoned the claims for defamation (for publicly accusing Turkcell of extortionate litigation) and breach of contract (for publicising confidential communications between the companies).

It also claimed in the US that MTN in effect stole its business plan, engaged in “civil conspiracy” and helped violate US treaties in relation to the alleged arms deals with Iran.

In this week’s summons, the alleged campaign to win Iranian favour is recast as “wrongful and intentional interference”. In the alternative, Turkcell says it constitutes “corruption and bribery”.

Instead of a claim against MTN Group and its Mauritian subsidiary, MTN International, the local case also cites MTN’s former CEO and current chairperson Phuthuma Nhleko and former MTN executive Irene Charnley individually, as well as MTN’s South African units.

Turkcell is claiming $4.2?billion (R42.9?billion) plus 15.5% interest per year and legal costs based on the estimated value of the Irancell stake to MTN over the initial 15-year duration of the licence.

Irancell now represents MTN’s second-largest subscriber base and the third-largest earnings generator after Nigeria and South Africa with 40.5?million subscribers and revenue of R12.2?billion last year.

It is no secret that MTN intensely lobbied Iranian and South African politicians to get the licence.

These efforts are documented at length in Leonard Hoffmann’s report. It includes getting South Africa’s former defence minister Mosiuoa Lekota to visit Iran and sponsoring Iranian visits to South Africa.

MTN appointed an “independent commission” headed by Hoffmann two months before the US complaint to investigate allegations of bribery, political influence peddling and specifically, the implication of the two senior executives.

In February this year, the commission produced a report claiming that MTN and its bosses’ hands were clean.

It slammed Kilowan as a “fantasist and a conspiracy theorist” whose evidence was a “fabric of lies, distortions and inventions”.

None of the allegations have been tested in a court.

Even Hoffmann’s report could not tie up all the loose ends in a way that definitively exonerated MTN or Nhleko.

One of these is the alleged $400?000 “sham contract” for the benefit of senior Iranian official Javid Ghorban-Oghli.

It is the one sum of money allegedly meant as a bribe that MTN admits to paying although the company denies any knowledge of who authorised it or what it was for.

The money was paid on an invoice countersigned by Nhleko although Hoffmann’s report speculates that his signature was either forged or obtained by having him sign it unwittingly.

Handwriting experts were contracted by Nhleko and the commission. While Nhleko’s expert confidently declared the signature as a fake, the second expert said there was a possibility it was fake, but there was very little evidence to prove it either way.

Another loose end is the alleged bribe of $200?000 paid to Saloojee.

Turkcell has tried Iranian courts as well as international investor dispute resolution in terms of a Turkey-Iran treaty and rules set by the International Chamber of Commerce.

In a curt announcement in a press release on Thursday, MTN promised to “vigorously defend” itself in the renewed case.

MTN said: “The lawsuit now launched in South Africa is the fifth and is premised on substantially the same unfounded allegations which were made in the US proceedings.

“As MTN, we view this as nothing but a spurious attempt to claim monies to which Turkcell is not entitled.”

Turkcell’s failure in Iran was due to “its own failings, and not because of any impropriety by MTN”, it added.

Turkcell’s battles

Turkish mobile operator Turkcell’s Iletisim Hizmetleri is no stranger to international courts or the International Chamber of Commerce’s International Court of Arbitration in Paris.

Apart from the four previous attempts to claim damages in relation to the Iranian licence that Turkcell lost to MTN, the company has been embroiled in a constant stream of court cases and legal proceedings for more than a decade.

Earlier this year, a UK court finally settled a long-running dispute between the company’s two major shareholders, Cukorova and Alfa, about who owns a disputed 14% of Turkcell.

That was after the dispute this year scuppered the company’s AGM as the allocation of voting rights could not be agreed on.

Turkcell has also been in the sights of Turkey’s communications authority, Treasury and competition authorities for more than a decade. It has been launching or fending off fines and court cases related to the running of its network in the country – especially how it charges and accounts for interconnection fees.

It also has about five legal matters against Turkish Telekom. All of them revolve around the issue of interconnection.

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