MTN faced a potential lawsuit in the US relating to allegations that it bribed Iranian and South African government officials, the largest cellular operator in Africa said yesterday.
The bribes were allegedly aimed at securing the second GSM licence in Iran. MTN’s 49 percent-owned Irancell won that licence in 2005.
In a statement issued yesterday, MTN said that Turkcell, which was an unsuccessful bidder for the second cellular licence in Iran, had informed the JSE-listed firm that it was looking to bring a case against it and Irancell in a US court.
Turkcell believed that the alleged bribery represented a contravention of US law.
So far no such claim has been filed in the courts or served on MTN.
MTN’s statement said the Turkcell claim alleged that “in approximately 2004 and 2005, in an effort to cause the Iranian government to issue the second GSM licence to MTN rather than Turkcell, MTN made improper payments to an Iranian and a South African government official”.
Turkcell also alleges that MTN encouraged the South African government to take a favourable position towards Iran’s civil nuclear power development programme at a meeting of the International Atomic Energy Agency in November 2005. It further alleges that MTN enlisted South African government support for the provision of military equipment to Iran.
Turkcell has been unsuccessful in proceedings it commenced in late 2005 against the Iranian Ministry of Telecommunications relating to its unsuccessful bid for the licence.
In 2008 Turkcell instituted international arbitration proceedings, which are still pending, against Tehran.
The MTN board believes the Turkcell allegations lack legal merit and also that “a US court would not have jurisdiction to entertain the claim”.
In an announcement issued to the JSE late yesterday, Cyril Ramaphosa, the chairman of MTN, said irrespective of the validity of Turkcell’s claims, the very fact that such allegations had been made was 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 in depth and to recommend appropriate action,” Ramaphosa said.
It would comprise non-executive members of the board and would be chaired by Lord Hoffman, a South African-born judge and jurist.
Analysts said last night that whether or not the allegations were proved or even went to court, they represented a significant blow to MTN. They welcomed the appointment of a high-profile committee to investigate the matter and stressed that it would have to be seen as independent if it was to effectively counter the potential fallout from the Turkcell allegations.
“This is all MTN needs right now,” remarked one analyst, adding: “With the difficulties in Syria and the challenges in Nigeria, MTN’s international growth strategy is looking under threat.”
MTN’s Iranian operation contributes about 9 percent of profit. Even ahead of these allegations analysts were querying how long MTN could survive in Iran given the growing international pressure against the Tehran government.
MTN closed 2.06 percent up at R138.20 ahead of the news. - Ann Crotty