/ 10 February 2012

MTN in bed with Iran’s military

Mtn In Bed With Iran's Military

Competing mobile operators MTN and Turkcell were silent this week on the latter’s claims that MTN bribed its way into Iran six years ago.

But circumstances surrounding MTN’s audacious entry into Iran, and the South African government’s concurrent diplomatic efforts there, provide a compelling context for the claims.

MTN could also face increasing international pressure because the Iranian military owns one of MTN’s two state-linked partners there, Iran Electronics Industries (IEI).

IEI is also the subject of a web of United States and European sanctions that target proliferators of “weapons of mass destruction”.

In 2005, MTN controversially displaced Turkcell in a consortium that had provisionally won a lucrative mobile phone licence in Iran. Turkcell was, until then, a leading partner in the bid.

Last week, MTN pre-emptively announced claims by its Turkish counterpart that in 2004 and 2005, “in an effort to cause the Iranian government to issue the licence to MTN”, MTN had bribed officials in South Africa and Iran.

In the release, MTN also revealed that it was said that it leaned on the South African government “at a meeting of the International Atomic Energy Agency in November 2005” to support Iran on nuclear power development in the face of intense international pressure, and that MTN “enlisted” the South African government to facilitate the provision of military equipment there.

The Mail & Guardian has not seen evidence to back these claims, and both MTN and Turkcell refuse to elaborate.

But MTN did not deny the allegations, saying only that it “believes that the Turkcell US claim lacks legal merit” and that US courts would not have jurisdiction.


MTN has launched an inquiry into the allegation under former jurist Leonard Hoffmann.

An analysis of South Africa’s diplomatic relations with Iran in 2004 and 2005 and the process leading to MTN’s licence award provides a credible scenario for Turkcell’s claims, suggesting an interweaving of commercial and diplomatic interests.

  • In February 2004, a consortium called Irancell was provisionally awarded a sought-after licence to open Iran’s second mobile phone network. Turkcell, a 70% shareholder, led the consortium.

    Turkcell’s partner in the consortium was the Iran Electronic Development Company, made up of two state-linked companies: IEI and the Mostazafan Foundation of Islamic Revolution.

    Before the licence could be finalised, it needed to be approved by the Iranian Parliament and Turkcell had to pay a €300-million licence fee.

    However, news reports and market releases from Turkcell show that parliamentary approval was delayed throughout 2004.

  • In August 2004, South Africa’s former deputy foreign minister, Aziz Pahad, flew to Tehran for preparatory talks before a binational meeting.

    While there, Pahad met Mostazafan Foundation president Mahmoud Farouzandeh. A department of international relations and co-operation statement said Pahad and Farouzandeh explored political and economic relations, particularly “in the fields of electricity, communication and oil and energy”.

    No specific mention was made of MTN or Irancell.

  • That December, at the South African-Iranian Joint Bilateral Commission, South Africa’s then foreign affairs minister, Nkosazana Dlamini-Zuma, said $4-billion in South African investments in Iran were “nearing finalisation”.

    She did not mention MTN directly, but a joint statement the following day revealed that MTN was one of six South African companies at the conference.

    The statement said MTN had recently opened a Tehran office having “identified the potential of the Iran telecommunications market”.

    No mention was made of the licence to be awarded to Irancell, but MTN was ostensibly interested in a third mobile-operator licence on the cards and the possible privatisation of the existing licence.

  • In January and February 2005, according to Turkcell market releases, “unofficial” government statements suggested the Iranian Parliament had resolved that Turkcell should reduce its stake in Irancell from 70% to 49%. By June, Turkcell was responding to unconfirmed reports that it had been excluded altogether.
  • Throughout 2005, Iran came under intense pressure from the US, Europe and Israel, which believed Iran was covertly building nuclear weapons while claiming its activities were civilian.

    In September 2005, a US and European-sponsored resolution was passed by the International Atomic Energy Agency (IAEA) finding Iran guilty of violating its commitments as a Nuclear Non-proliferation Treaty signatory and resolving to refer it to the United Nations Security Council.

    In the lead-up to the September resolution, South Africa emerged as an important player.

    As South Africa had taken a sympathetic line on Iran’s nuclear programme and wielded considerable influence among developing nations, it was courted by the US, Israel and Iran itself, which sought assistance in negotiations with the West.

    Represented by its delegate Abdul Minty, South Africa abstained from the September IAEA vote.

  • That same month, Turkcell agreed to reduce its shareholding in Irancell to 49%, but news reports claimed days later it had been replaced by “another firm”. Turkcell insisted it had received no formal communication.

    Ten days later, MTN publicly expressed its interest. Its executive, Irene Charnley, invoked South Africa’s good relationship with Iran, saying the company had decided “to contribute” to the consortium.

    “Iran and South Africa enjoy good political and economic relations and MTN hopes to have a significant share in promotion of the ties,” she said.

    Throughout October 2005, comments by local officials suggested Turkcell had been replaced, while it insisted it had not been ousted from the consortium.

  • On November 21 2005, MTN announced it was the 49% shareholder in Irancell after paying the €300-million licence fee.

    Three days later, Minty spoke at an IAEA meeting, where the agency presented a favourable report on Iran. He noted that South Africa believed the September resolution on Iran “was not the correct course of action”.

    This may have been the meeting where, according to Turkcell, “MTN encouraged the South African government to take a favourable position toward Iran’s civil nuclear power development programme”.

    Three days later, MTN stated that Irancell had been formally awarded the mobile operator licence. The company launched the next year, in October 2006. In 2008, Turkcell launched arbitration proceedings against the Iranian government.

    Its subsidiary, the East Asian Consortium, launched separate arbitration against the Iran Electronic Development Company, its former partner in Turkcell, for violating a shareholders’ agreement.

    In September 2008, the US Treasury’s Office of Foreign Assets Control placed one of MTN’s Irancell partners, IEI, on a list designed “to combat the proliferation of weapons of mass destruction”.

    This “blocks the property of persons engaged in proliferation activities and their support networks”. The company allegedly manufactures electronic components for Iran’s weapons systems.

    IEI, reportedly wholly owned by Iran’s ministry of defence, was also sanctioned by the European Union in June 2008 as well as under the US Iran and Syria Non-proliferation Act in December 2006.

    MTN’s other partner in Irancell, the Mostazafan Foundation of Islamic Revolution, is purportedly a charitable body designed to benefit veterans of the Iran-Iraq war of the 1980s.

    It is one of the biggest holding companies in the Middle East, managing about 400 concerns.

    US and UK sources have linked the foundation to “weapons of mass destruction” procurement. This could not be substantiated.

    Contacted by the M&G, Minty said MTN had not put any pressure on him: “At no point did they approach me to influence me in any direction.”

    He said South Africa’s position on Iran at the IAEA was “very consistent”.

    “I don’t know what Turkcell knows. We weren’t pushed by anyone.”

The department of international relations and co-operation has echoed Minty’s denial, saying no one influenced policy implementation.

Charnley could not be reached and an official in her office said she was abroad. Messages were left for Pahad, but he did not respond.

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