Shares in MTN Group have slid after rival Turkcell filed a lawsuit against the mobile operator, alleging it bribed officials to win an Iranian bid.
Shares in MTN Group slid on Friday after rival Turkcell filed a $4.2 billion suit against the South African mobile operator, alleging it bribed officials and lobbied support for Tehran’s nuclear programme to win an Iranian licence.
Turkcell, which lost the 2004 bid for the Iranian licence to MTN, filed the suit in a US federal court in Washington, accusing the Johannesburg-based firm of using its influence with Pretoria to arrange support for Iran’s military.
The Turkcell case threatens to tarnish the reputation of both MTN—a black-run company widely seen as a post-apartheid success story—and the South African government, including former President Thabo Mbeki.
It comes at a time when countries around the world, including South Africa, are under strong Western pressure to halt oil imports from Iran and cut other trade.
MTN, Africa’s top mobile operator, has said the claim is without legal merit and has accused Turkcell of attempting to extort money from it—an allegation the Turkish company rejects.
Turkcell’s suit, backed by a collection of alleged MTN internal documents including emails, invoices, memos and presentations, accuses the South African firm of a “staggeringly brazen orchestra of corruption”.
Turkey’s largest mobile operator alleges that under a strategic plan code-named “Project Snooker”, MTN used corrupt practices to win the licence which had initially been awarded to Turkcell.
MTN owns 49% of local unit Irancell, from which it generates nearly 10% of its annual revenue.
“Upset by its loss of the open competition, MTN sought to obtain illegally what it could not obtain through honest competition,” the Turkcell lawsuit said.
It notes Iran had initially announced Turkcell as the winning bidder for the Irancell licence in February 2004, following a tender in which multiple companies participated.
“MTN used its high-level political influence within the South African government to offer Iran the two most important items that the country could not obtain for itself: 1) support for the Iranian development of nuclear weapons; and 2) the procurement of high-tech defence equipment”.
Pretoria has denied the claims, saying its foreign policy is independent. Foreign ministry spokesperson Clayson Monyela said: “We are not going to engage in (a discussion about) the merits of a case in which the government is not a respondent.”
MTN’s strong ties to the government are well documented: the company was set up with government help in 1994 as the first black-owned company after the end of apartheid.
MTN Chairman Cyril Ramaphosa, who is also mentioned in the suit, is a leading member of the ruling ANC.
Shares in MTN dropped 3% to 133.12 rand by 12.35pm GMT. The shares fell 1.5% on Thursday when Turkcell announced it had filed the suit.
The lawsuit could be damaging enough for MTN to reconsider its presence in Iran, said Abri du Plessis, chief investment officer at Gryphon Asset Management in Cape Town.
“Especially since it’s going via the US there could be enough pressure for them to exit,” he said. “It could be possible that they don’t get a good price even if they do a deal with the Turks and sell it to them.”
Turkcell said it had brought the suit in a US court because it believed MTN breached international law.
The lawsuit says MTN promised Iran it could deliver South Africa’s vote at the International Atomic Energy Agency (IAEA) and that it promised Iran defence equipment otherwise prohibited by international laws. It also accuses MTN of bribing government officials in both Iran and South Africa.
Turkcell alleges that MTN ultimately secured South Africa’s abstention on a crucial decision at the IAEA on referring Iran to the United Nations Security Council.
According to the lawsuit, MTN arranged a private meeting between the then South African President Mbeki and Iran’s national security advisor and nuclear negotiation chief, Hassan Rowhani.
MTN has set up an independent committee led by UK legal expert Lord Hoffmann to investigate the claims. It has said Turkcell refuses to cooperate with the committee.—Reuters