Picture: EPA/KIM LUDBROOK
Picture: EPA/KIM LUDBROOK

Turkish telecoms company Turkcell’s $4.2bn claim against MTN is heading for trial at the High Court in Johannesburg after years of delays.

The latest development in the long-standing feud comes at a time when MTN’s new management is implementing strategies to strengthen risk, compliance and governance systems, following a massive fine for flouting Nigerian rules.

Turkcell originally filed its lawsuit against MTN in the US in 2012, but withdrew the case after the US Supreme Court ruled in another case that US courts did not have jurisdiction in cases involving foreign companies in disputes outside the US. In 2013, it lodged its lawsuit in the High Court in Johannesburg.

Turkcell is accusing MTN of corruption by bribing officials, arranging meetings between Iranian and South African leaders and promising Iran weapons and UN votes in exchange for a licence to provide cellphone services in Iran.

MTN maintains that there is no legal merit in the claim and it will defend the matter.

MTN owns a 49% stake in Iran’s mobile network operator, Irancell. Iran Electronic Development Company owns the remaining 51%. Turkcell said it was initially awarded the licence, which was then given to MTN in 2005.

Turkcell said its lawsuit had been delayed by objections from MTN and amended particulars of the claims by Turkcell as it sought to accommodate these objections.

"We believe we have a very strong claim. The South African courts will be able to evaluate the huge amount of evidence we have to support our claim that MTN went to extraordinary lengths to unlawfully take Turkcell’s rights to the Iranian GSM licence," said Serhat Demir, legal and regulation executive vice-president at Turkcell.

MTN said that recent developments were procedural in nature and they had nothing to do with the merits of the case.

Mergence Investment Managers portfolio manager Peter Takaendesa said it was surprising that Turkcell was continuing to pursue this case, given that the Iran licensing took place more than a decade ago and they had failed to benefit from the same claim when they approached the courts in the US and many other platforms.

"It’s unfortunate that MTN has to deal with this issue again at a time when the new management team needs to focus more on the turnaround programme, but it is also important that the law takes its course," Takaendesa said.

Falcon Crest Asset Managers chief investment officer Farai Mapfinya said at the time of withdrawal of the US case and the subsequent findings of the independent investigation of the Hoffman Enquiry that it had a sense that Turkcells’ pursuit was "mere corporate game play in which it had nothing to lose if they pursued the case, but a material windfall should the allegations stick.

"There hasn’t been any new information since and consequently, we pretty much still hold the same view on the matter unless the court case reveals further adverse details we are not aware of.

"It does, however, give a fresh negative spotlight on MTN, which damages confidence and perpetuates sentiment of MTN being an irresponsible corporate citizen and a risky investment," Mapfinya said.

The $4.2bn claim against MTN is calculated from the profit that Turkcell said it would have made had it operated the Irancell licence it had been lawfully awarded. Turkcell is also claiming interest on that amount, from 2005.

Turkcell would seek the earliest possible trial date, Demir said.

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