Behind the Turkcell SA High Court action over Iranian licence – what does it know that MTN, Judge Hoffmann doesn’t?

Turkcell, a R136bn market cap Turkish-based mobile phone group, is persisting in its corruption allegations against locally-headquartered MTN (market cap R371bn). It revolves around the last minute switch of a lucrative Iranian licence from Turkcell to MTN. Turkcell accuses MTN of bribing Iranian officials – a claim supported by Chris Kilowan, the man the SA company’s sent to the Middle East to secure the licence. It doesn’t help MTN’s case that corruption is endemic in Iran. In March last year, Turkcell brought a case against MTN in the US but withdrew, it says, when realising that for technical reasons it couldn’t win. Most thought that was the end of it. But this week Turkcell served papers in the Gauteng High Court. MTN is relying on the findings of the Cape Town-born and educated retired UK Judge Leonard Hoffmann whom it commissioned to investigate. Lord Hoffmann came up with a clean bill of health for the company. But if that’s really the case, why is Turkcell persisting? What does it know that Lord Hoffmann doesn’t?  What follows below is the transcript of today’s CNBC Africa interview with top tech analyst Spiwe Chireka and the full statement from MTN. Both make fascinating reading. – AH

To watch this CNBC Power Lunch video click hereSpiwe Chireks - IDC -2

ALEC HOGG:  Turkcell has filed a court case against SA’s mobile provider MTN.  This is to do with Iran as we were just discussing a moment ago.  Joining us now on the line to share her views of the case, is Spiwe Chireka, Programme Manager for Telecoms and Networking for Africa at the IDC.  Thanks for coming through, Spiwe.  Maybe you can give us your insights.  Certainly, the people at Turkcell can’t be such idiots to fight a lost cause in the South African courts.  There has to be something serious motivating this latest action.

SPIWE CHIREKA:   Yes definitely, it just goes to show that it is something that they are seriously pursuing, because we know that earlier in the year, they had tried to file the case in the US courts and the US courts did say they don’t have jurisdiction.  I guess they decided ‘let’s bring it to a country that has jurisdiction over MTN and MTN’s activities elsewhere in the world’, and therefore here we are seeing the case come up again.

ALEC HOGG:   How big is Turkcell?

SPIWE CHIREKA:   Turkcell is a very big operator.  They are the leading operator in Turkey and they operate across nine countries in the regions – if you look at Tehran, the Middle East area – and in most of those markets they are sitting at number one or number two – so a very big player in that region.  If we look at the Middle Eastern bloc of countries, Iran is one of the countries that has proved to be very lucrative, because if we look from MTN’s perspective, where Iran sits, and its portfolio of operations – not only the Middle East, but in Middle East Africa – it is definitely up there.  Therefore, I guess it’s a case of Turkcell realising ‘hang on.  We actually lost out on a very lucrative opportunity’ and I guess that’s why we have the case that we have today.

ALEC HOGG:   And the grounds that they’re bringing for this case?

SPIWE CHIREKA:   Well, I guess it’s one of those where they would like someone to be held accountable for the fact that they lost their license.  Now we are still wondering what the ultimate outcome is.  Is it a case of should MTN then be found guilty, or are they being accused of paying a bribe and depriving Turkcell of the opportunity of actually getting the license.  Is it a case of them then wanting to take it back to Iranian courts and saying, ‘you see, there you go.  The awarding was not properly done and therefore the license is reissued’, or is it just to prove a point that ‘we’ve been right all along’.  We’re therefore not quite sure yet what exactly their intentions are, should it turn out that MTN is guilty.

ALEC HOGG:   Spiwe Chireka is Programme Manager for Telecoms and Networking for Africa at the IDC.

MTN investors have ignored the potential risk of Turkcell's $4.2bn claim against the ~sa cell phone company.
MTN investors have ignored the potential impact of Turkcell’s $4.2bn claim against SA cell phone company. Wise? Maybe not

Late this afternoon MTN issued the statement below outlining its side of the case:

MTN Group will vigorously defend the Turkcell lawsuit, the Turkish operator‘s fifth claim arising from the unsuccessful bid to obtain a mobile licence in Iran.

The latest attempt by Turkcell was issued out of the South Gauteng High Court this week. Like the four previous cases, this matter emanates from Turkcell’s alleged grievances arising from its unsuccessful bid to obtain a mobile licence in Iran, and the award of that licence to Irancell.

While the summons has not yet been served on it, MTN understands that the claim is now made against MTN, its wholly owned subsidiary, MTN International (Mauritius) Limited (MTNI) and others, in which Turkcell claims an amount of some US$4.2 billion, plus interest and legal costs

By way of background, three of the suits brought by Turkcell and its subsidiary, East Asian Consortium (EAC) have already been dismissed, including one against MTN and MTNI.

In late 2005, EAC was unsuccessful in its bid before the Iranian Court to restrain the Iranian Ministry of Telecommunications from committing what the EAC alleged were breaches of certain statutory requirements and agreements.  This was followed by arbitration in 2008 against the Iran government under the Turkey-Iran Bilateral Investment Treaty, which has not yet been decided.

Also in 2008, EAC commenced an arbitration under the rules of the International Chamber of Commerce (ICC) against Iran Electronic Development Company for alleged breach of a shareholder’s agreement concluded between the parties in 2004. The ICC Tribunal dismissed Turkcell’s claims in a final award in April 2012.

Turkcell filed a suit against MTN in the USA in March 2012, accusing the company of bribery and other acts of corruption that it said caused it to lose out on the license to operate a mobile network in Iran.

MTN’s belief was that it was entirely inappropriate and opportunistic for Turkcell to invoke the Alien Tort Statute to bring a commercial dispute between a Turkish company and a South African company before a US court.  The 1789 law, usually cited in human rights and torture cases, gives US courts’ jurisdiction in some instances to consider claims by foreigners for illegal conduct that occurred in another country.

Turkcell’s US suit was dismissed in May this year, after a U.S. Supreme Court ruling on another case significantly curtailed the reach and ambit of the Alien Tort Statute.

The lawsuit now launched in South Africa is the fifth, and is premised on substantially the same unfounded allegations which were made in the US proceedings.

As MTN, we view this as nothing but a spurious attempt to claim monies to which Turkcell is not entitled.

MTN maintains that it did not cause Turkcell to lose out on its obtaining a mobile licence in Iran, as has been claimed by Turkcell.  Its inability to procure the licence was as a result of its own failings, and not because of any impropriety by MTN (which is strongly denied).

In February 2012, the MTN Group Board commissioned Lord Hoffmann to head an independent Committee to investigate the allegations made by Turkcell in the legal case brought against MTN in the United States. After a lengthy and thorough process, the Hoffmann Committee concluded that Turkcell’s allegations were without foundation, and that nothing in the conduct of MTN over that period put at question MTN’s integrity or propriety.

The Hoffmann Committee cleared MTN of the bribery allegations.

The Hoffman report itself, a document of over 500 pages, is accessible to any member of the public via our website. And as Lord Hoffman noted in the report, in compiling their findings, the Special Committee received full co-oporation from MTN and was given unrestricted access to all individuals, information, documents and facilities it requested.

For more background on the case, please visit

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