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‘MTN used bribery to win licence’

Economy

MTN bribed officials, arranged meetings between Iranian and South African leaders, and promised Iran weapons and UN votes in exchange for a licence to offer cellphone service there. These are the allegations in a lawsuit filed by licence rival Turkcell Iletisim Hizmetleri.

Turkcell, which initially was awarded the Iranian cellular licence, sued its JSE-listed rival on Wednesday in federal court in Washington for $4.2 billion (R32bn) in damages. The suit includes numerous alleged internal MTN memos that detail the company’s efforts to win the Iranian business after losing the bid to Turkcell in February 2004.

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Photo: Tracey Adams

“Upset by the loss of the open competition, MTN sought to obtain illegally what it could not obtain through honest competition and thereafter embarked on a premeditated programme of corruption through bribery and trading in influence,” the complaint states.

MTN had noted the Turkcell filing, MTN spokesman Xolisa Vapi said yesterday, without further comment.

The licence tender was “the largest new international telecoms opportunity in the world and was known to involve the largest single investment opportunity into Iran since the 1979 Revolution,” read the complaint prepared by Patton Boggs, a US-based international law and lobbying firm.

MTN shares dipped as much as 2.6 percent yesterday, and closed 1.5 percent lower at R37.40. The stock has declined 4.8 percent this year, for a market value of R258bn. Turkcell slipped 0.9 percent yesterday.

In memos attached to the complaint, MTN codenamed the effort “Project Snooker”, describing pay-offs to Javid Ghorbanoghli, then Iran’s deputy foreign minister, dubbed “Long-J”, and Yusuf Saloojee, South Africa’s ambassador in Tehran at the time, codenamed “Short-J.’’ The men were paid $400 000 and $200 000 respectively, according to the complaint.

In a September 21, 2005, memo attached to the lawsuit, then-MTN chief executive Phuthuma Nhleko said: “Project Snooker still presents one of the most significant ‘virgin’ mobile opportunities in the world.” MTN signed deals with Iran that week “under duress” to “book our place at the foot of the mountain”, he wrote, according to the memo.

MTN prevailed on the South African government to abstain from three votes on Iran’s nuclear energy plan at the UN’s International Atomic Energy Agency (IAEA) in Vienna in 2005 and 2006, according to the complaint. The Iranian communications ministry allegedly told MTN it was withholding its licence until it saw how South Africa voted at the IAEA meeting.

South Africa’s representative to the IAEA, Abdul Minty, abstained from an IAEA vote on Iran on November 24, 2005. The licence was delivered three days later, the complaint states.

The complaint says MTN in August 2004 struck a deal with Ali Shamkhani, then Iran’s defence minister, to facilitate South African military co-operation and the delivery of defence equipment, including Denel AH-2 Rooivalk helicopters, encrypted military radios, sniper rifles, G5 howitzer artillery weapons, cannons, armoured personnel carriers and radar technology. The list was set in a 2004 memorandum of understanding, which was not included with the suit.

MTN executives and the Iranian officials came to call the shopping list by the codename “The Fish”, the complaint alleges, as much of the equipment on the list was not available to Iran through legitimate channels because of US and international restrictions.

While MTN had promised Iran it could deliver South African military aid, no arms sales took place, angering Iranian officials, Turkcell claimed.

Turkcell’s complaint cites violations of the Alien Tort Statute, a 1789 law that gives US courts jurisdiction in some instances to consider claims by foreigners for illegal conduct that occurred in another nation.

The US Supreme Court is considering a case brought by a group of Nigerians seeking damages under the statute, claiming Royal Dutch Shell helped their government commit torture and murders in the early 1990s. Shell argued that corporations could not be sued under the law. Four federal appeals courts had permitted corporations to be sued under the statute, the Nigerians argued.

On March 12, MTN issued a statement accusing Turkcell of attempted extortion and saying Turkcell had threatened a suit alleging improper payments to an Iranian and a South African official. MTN said at the time that any such suit lacked merit.

MTN also said that US courts would not have jurisdiction over any such case as the “accusations involve conduct alleged to have taken place in South Africa and Iran, and have no connection to the US”.

MTN established a committee of non-executive directors to probe Turkcell’s allegations.

The claims against MTN include aiding and abetting violation of US treaties, tortuous interference with a contract, defamation and breach of contract related to a confidentiality agreement that Turkcell says MTN violated.

A “highly confidential” March 25, 2007 alleged memo to MTN’s chief executive from its representative in Iran, Chris Kilowan, recounts Saloojee’s description of visits to South Africa by top Iranian officials on behalf of supreme leader Ayatollah Ali Khamenei and President Mahmoud Ahmadinejad.

Khamenei dispatched Ali Larijani, then the secretary of Iran’s Supreme National Security Council, to remind Thabo Mbeki, South Africa’s leader at the time, “that certain defence-related promises were made by the South African minister of defence in 2004 in exchange for which MTN was allowed to replace Turkcell in the Irancell consortium”, the memo says.

The memo reports that Manouchehr Mottaki, then Iran’s foreign minister, was sent by Ahmadinejad to “get a direct answer” from Mbeki about the alleged promises to sell arms to Iran. Mbeki “would not like to be drawn into the matter”, his spokesman, Mukoni Ratshitanga, said yesterday.

Mottaki “reiterated their understanding that MTN was allowed to replace Turkcell in exchange for defence co-operation”, Kilowan says in the memo with the complaint. The suit also alleges that former South African trade unionist Irene Charnley, then a senior executive at MTN, arranged meetings for Iranian officials with Mbeki and the defence minister in 2004 and 2005, when MTN was trying to wrest the licence away from Turkcell.

Efforts to reach international government spokespeople and officials with knowledge of the case were unsuccessful. This included Lanny Davis, a lawyer representing MTN at a Washington firm.

Turkcell’s agreement suffered a setback in 2005 when Iran’s parliament ordered the company to reduce its stake from 70 percent to 49 percent, deeming that foreign control of the joint venture was a threat to Iran’s security. Turkcell eventually agreed, and later paid the licence fee in September 2005, according to the lawsuit.

Turkcell claims that Iran continuously changed its terms, opening the way for MTN to replace the Turkish company in the deal.

As part of the new deal, MTN, which controlled only 49 percent of the Irancell consortium, also agreed to pay capitalisation costs, taxes and licence fees owed by the Iranian shareholders, the complaint alleges. The payments, including $88 million in capitalisation costs, were allegedly disguised as loans that “MTN knew at the time would not be repaid”.

MTN’s Iran division, known as MTN Irancell, contributed R5bn in revenue in the first six months of last year, or about 9 percent of MTN’s sales, and R2.1bn in earnings before interest, tax, depreciation and amortisation, MTN figures show.

MTN plans R1.3bn in capital expenditures in Iran, up from R1.2bn last year. MTN had 33 million subscribers in Iran as of September 2011, and was budgeting for 4 million new customers in Iran this year, the firm said this month.

Turkcell said MTN’s business dealings in the US were “extensive”, giving the US court so-called personal jurisdiction over the group. Turkcell cites MTN’s roaming deals with US cellular carriers AT&T and T-Mobile USA, the sale of airtime at 7-Eleven stores, collaboration with Facebook and contracts with Intel, Microsoft and Cisco Systems as evidence.

Turkcell adds that one of MTN’s directors lives in the US. – Bloomberg

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