'MTN bribed its way into Iran'
FOR MTN, it represented a unique chance to seize what its CEO called "one of the most significant 'virgin' mobile opportunities in the world".
But the location, he added in a memorandum marked "Strictly Confidential", was "no normal country".
The country was Iran. MTN Group was widely seen as a post-apartheid success story. Now, seven years after MTN and its local partners won a lucrative licence to launch a new Iranian mobile-phone carrier, the deal is swirling in controversy and raising embarrassing questions for South Africa at a time when the Western world is trying to contain Iran's nuclear ambitions.
Turkcell, an Istanbul-based rival, in March filed a federal lawsuit in Washington alleging MTN bribed its way into Iran and stole the licence from under it. It is seeking at least $4,2bn (about R350bn) in damages. The Hawks are investigating.
MTN has denied the allegations and called Turkcell's demands "extortionate".
MTN has appointed a prominent judge in London to conduct an internal probe of the allegations surrounding what has become one of its most valuable holdings. Last year, MTN generated $1,3bn (about R10,8bn), or 9% of its annual revenue, from its Iran venture, the company reported.
The core of the Turkcell case is the sworn testimony of Chris Kilowan, a former MTN executive who guided the company's bid to win the Iranian licence and has emerged as the key witness. He has turned over to Turkcell's attorneys some 7000 pages of internal MTN documents related to "Project Snooker" - MTN's code name for its effort. "We said we are going to snooker Turkcell," Kilowan testified.
MTN, now Africa's largest mobile phone carrier, has called Kilowan "a disgruntled former employee" and has termed his allegations "outlandish".
During three days of sworn testimony in Washington last month, Kilowan presented a tale of a multinational company so intent on winning a contract, it was willing to help Tehran obtain military hardware, sway SA's votes before the UN's International Atomic Energy Agency and pay bribes, sometimes in the guise of consulting fees. MTN has yet to give evidence in the case, which may go on for years.
Kilowan admitted fronting $200000 (about R1,6m) of his own cash to reward SA's then ambassador to Tehran, Yusuf Saloojee, for assisting MTN in Iran. Kilowan says it was MTN's later refusal to pay him back that made him cooperate with Turkcell.
Saloojee didn't respond to requests for comment. Other SA officials denied Kilowan's allegations.
Kilowan's story begins in 2004 when MTN sent him to Iran.
MTN had seemingly lost out to Turkcell for the licence to launch the country's second mobile-phone operator. He testified that he began meeting with Iranian officials to determine what had gone wrong with MTN's bid and lay the groundwork for competing for a licence to run a third carrier.
Kilowan said he learned from Ambassador Saloojee that MTN shouldn't give up on pursuing the second licence even though it appeared Turkcell had won. It also soon became clear to Kilowan that if MTN was going to undo Turkcell's victory, it would have to meet a long and growing list of onerous Iranian demands.
The bidding rules required foreign companies to partner with Iranian entities. Turkcell's partners had included Sairan, which Kilowan testified was an arms manufacturer owned by Iran's Ministry of Defence, and Bonyad Mostazafan, a foundation he said reported directly to Iran's supreme leader.
He portrays Sairan and Mostazafan, which eventually teamed up with MTN, as manipulative and untrustworthy, and wrote in an internal memo that MTN's desire for the licence "should not blind us to the clear reality that we are not negotiating with honest partners". Sairan and Mostazafan could not be reached for comment.
Kilowan said he and two SA diplomats held a meeting in March 2004 with a Sairan official, who complained that SA had failed to deliver military radios Iran had purchased a year earlier. "You should push your government that they must sell these things to us," Kilowan quoted a Sairan official as saying. "I said, 'Okay, I will talk to my people, and they will talk to the government'."
MTN had long standing connections to the SA government through the ANC, Kilowan testified: it was set up with government help in 1994 after the end of apartheid. Many MTN officials, including its chairman Cyril Ramaphosa, had been ANC activists during the struggle against white rule.
Ramaphosa said in February that MTN had set up a committee to probe Turkcell's claims, saying, "MTN has zero tolerance for corrupt and unethical business practices."
Kilowan testified that during meetings, the Iranians repeatedly raised their need to acquire military hardware, including drone aircraft, and to win support for Tehran's nuclear programme. He said he and his then boss, Irene Charnley, an MTN director, concluded that "if we could somehow develop a strategy around these two issues", MTN might be able to win the second licence.
According to Kilowan, MTN set out to provide the Iranians with access to high-level SA government officials. This included helping to arrange a visit to Iran by then defence minister, Mosiuoa Lekota.
Lekota visited Iran in August 2004, accompanied by MTN director Charnley and its then CEO, Phuthuma Nhleko, Kilowan testified. "It was specifically arranged so as to prove to the Iranians that MTN can deliver on the defence matters," said Kilowan.
Nhleko, who left MTN last year, told Reuters: "It is not for me to comment on the visits abroad of SA government ministers."
Charnley, who left MTN in 2007, said: "Turkcell's allegations are without substance. Neither I nor MTN were in a position to influence the policies or decisions of the SA or Iranian governments, and we did not do so."
Lekota told Reuters he had travelled to Iran "on official business" and not on behalf of MTN. "I have never had anything to do with the MTN licence," he said.
By the time MTN received the licence to launch the new telecom, MTN Irancell, it had made a series of concessions to its Iranian partners.
Although MTN owned 49% of the joint venture, it put up 100% of the licensing fee and capitalisation costs of $570m (about R4,7bn).
Meanwhile, MTN Irancell has become Iran's fastest-growing mobile phone operator, with 45% of the Iranian market. - Reuters