Picture: ISTOCK
Picture: ISTOCK


A year after MTN Group settled its huge fine for licensing infringements in Nigeria, it has to deal with a renewed claim from Turkish mobile phone operator Turkcell.

In the first week of May, Turkcell filed a damages claim against the African firm in the South Gauteng high court for offences it says cost the Turkish company a licence it had won in 2004 to operate Iran’s first cellphone company.

The suit came just three weeks shy of the first anniversary of MTN’s settlement with Nigeria, according to which the company agreed to pay a US$1.67bn fine to the Nigerian government.

In between, a smaller $8.5m fine from Rwanda sneaked in, while more damning allegations about the group’s conduct have been peddled on the floor of the Nigerian senate. Some members of Nigeria’s parliament have threatened to investigate and fine MTN for what they say is the illegal repatriation of profits from that country, a claim MTN denies.

Phuthuma Nhleko: MTN’s legal woes continue. Picture: FREDDY MAVUNDA
Phuthuma Nhleko: MTN’s legal woes continue. Picture: FREDDY MAVUNDA

But it is the Turkcell lawsuit that may be the most damaging yet. At $4.2bn, the Turkcell claim is equivalent to a quarter of MTN’s R216bn market capitalisation. More significantly, should Turkcell achieve maximum success in its pursuit of MTN, it would wipe R53.8bn from MTN’s revenue for the year ended December.

The company’s share price dropped from R122.36 at the time of the revived claim being filed in the high court to a low of R112.62, before rising slightly to under R114 at the time of writing. This is less than half the R260/share high MTN reached in September 2014.

Vodacom, on the other hand, is riding a wave of confidence. It has surpassed MTN by market capitalisation, and is trading close to its R170.89 record high.

Turkcell is asking the court to order MTN to pay it the $4.2bn plus interest at the rate of 15.5%/year for having usurped its 2004 licence to operate Irancell.

MTN initially lost out to Turkcell in the race for the Iranian licence. Turkcell alleges that MTN overturned this by paying bribes and other inducements to Iran and SA government officials, which resulted in government changing its policy and voting in favour of Iran at the UN’s International Atomic Energy Agency (IAEA) when the Islamic republic’s nuclear programmes were under consideration.

Though it has not yet filed its responding affidavit, MTN denies the allegations.

For Turkcell, it has been a long road to reach this stage. The company initially filed the lawsuit — all 144 pages of it — in the district court of Columbia in Washington, DC, in March 2012. But the US court dismissed the complaint, saying it lacked jurisdiction to hear the matter.

Undaunted, Turkcell pursued private arbitration with the Iranian government in terms of a bilateral agreement with Turkey.

Iran owns 51% of Irancell.

The private arbitration in Iran was dismissed on a technicality, says Eric van den Berg, a director of law firm Fasken Martineau.

The arbitrator found that the licence agreement was "not an investment by Turkcell, and therefore there was no basis for compensation", says Van den Berg.

In 2004/2005, Iran was on the ropes at the UN, with the IAEA probing allegations that it was pursuing a nuclear arms programme.

SA initially opposed Iran and was in favour of sanctions as part of US-led efforts to curtail its attempts to build nuclear weapons. But in September 2005, months after MTN allegedly started courting Iran’s decision makers, SA started arguing and voting in favour of Tehran, in contravention of government’s foreign policy.

Key among Turkcell’s allegations is that MTN paid bribes to Iranian officials, including $400,000 cash to foreign minister Javid Ghorbanoghli, as well as goods valued at R395,000 for Ghorbanoghli and his family. Turkcell alleges other SA and Iranian officials, including Iran’s chief nuclear negotiator, Hassan Rowhani (also spelt Rouhani), and SA’s then representative at the IAEA, Abdul Minty, were induced with material benefits.

"Working behind the scenes to bribe, corrupt, and control officials from the Iranian and SA governments, on November 24 2005, MTN secured SA’s abstention on a crucial decision at the IAEA," Turkcell said in the more detailed Washington lawsuit. "The nuclear vote was part of MTN’s greater scheme to exploit its political influence and take out Turkcell."

The scheme was codenamed "Project Snooker", says Turkcell.

MTN drew out the big guns, causing then president Thabo Mbeki and defence minister Mosiuoa Lekota to meet with key Iranian officials to discuss both the licence and Iran’s UN nuclear dilemma, says Turkcell.

Lekota had travelled to Iranian capital Tehran in August 2004 to meet defence officials, with a view to facilitating illicit arms trade between SA’s Denel and Iran, which was under arms embargo at the time, says Turkcell, adding that the Iranians were considering the Rooivalk assault helicopter and other arms.

The Washington lawsuit contains detailed allegations that would be a high mountain for MTN to climb when backed with evidence in court. Specific details of flights and meetings by SA, MTN and Iranian representatives in hotels in Tehran, Johannesburg and Cape Town, as well as alleged payments going through bank accounts in Dubai, are listed in the papers.

It will still be a while, though, before a trial date is set and the matter argued in open court, says Van den Berg, whose firm is representing Turkcell in the matter and will square up against other global firms.

Webber Wentzel will represent the five defendants that make up MTN subsidiaries and affected employees, with chairman Phuthuma Nhleko cited as the fifth defendant.

Former director Irene Charnley is represented by Glyn Marais Inc.

"It has taken three years to get to this stage in SA, and the defendants may only reasonably be in a position to file their opposing affidavits later this year. The trial date will possibly be during 2018," says Van den Berg.

For Turkcell to succeed in its lawsuit in Johannesburg, it only needs to convince the court that, on the balance of probabilities, the events in its allegations may indeed have transpired. That’s because the matter is a civil rather than a criminal matter, where proof beyond reasonable doubt is required to secure a conviction.

"We don’t need to prove any criminal conduct [on the part of MTN], but need to satisfy the court of the balance of probabilities," says Van den Berg.

That any trial is still at least a year away means the Turkcell monkey will weigh heavily on MTN’s back for a while yet.

By May 2019, when the trial is expected to have progressed, MTN will be paying its last 55bn naira instalment on the Nigerian fine.

The company’s long-suffering investors are no doubt hoping Turkcell will fail. But, more crucially, the hope is that MTN’s management will have had an opportunity to polish up its corporate governance practices.

• Mantshantsha directly and indirectly owns shares in MTN

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