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MTN’s licence row with Turkish cellphone giant might be headed to Constitutional Court

MTN’s licence row with Turkish cellphone giant might be headed to Constitutional Court
A pedestrian uses a smartphone while standing in front of street advertisement for Turkcell Iletisim Hizmetleri AS phone services in the Levent district of Istanbul, Turkey, on Thursday, Dec. 23, 2-15. Turkey needs to boost infrastructure investment to kick-start a new era of rapid growth in the Middle East's largest economy, said one of the two chief economic advisers to President Recep Tayyip Erdogan. Photographer: Kerem Uzel/Bloomberg via Getty Images
Ray Mahlaka
By Ray Mahlaka
1 Sep 2024
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The South African mobile network operator stands accused of issuing bribes to secure a lucrative telecom licence in Iran, and the Turkish complainant is prepared to take the case as far as it can go.

The battle between MTN and Turkish telecom giant Turkcell might be far from over because the latter is prepared to petition the Constitutional Court if it doesn’t have its way in South Africa’s lower courts.

For more than a decade, Turkcell has dragged MTN to courts, arguing that South Africa’s telecom giant was involved in a bribery and corruption scheme, which helped it to win a lucrative Iran licence in 2005.

Turkcell has suffered losses because it has failed to convince a lower court in South Africa to hear the merits of its case and argument that MTN allegedly hatched a plan to oust it from the licence, which was originally awarded to Turkcell.

Turkcell has now approached the Supreme Court of Appeal and the case was heard on 26 and 27 August. The merits of Turkcell’s case were not argued in this court because the company still has to argue before five judges whether South Africa has the jurisdiction to hear the case or whether it should be heard in Iran.

If the appeal court rules in favour of MTN and upholds an earlier high court ruling that South Africa has no jurisdiction to hear the case, Turkcell might go all the way to the Constitutional Court.

Cedric Soule, one of Turkcell’s counsel, told Daily Maverick that going to the apex court is an option the company would consider because it believes MTN has a bribery and corruption case to which it must answer.

MTN Turkcell A shopping street illuminated by Turkcell signs near Taksim Square in Istanbul, Turkey, on 13 June 2013. (Photo: Lam Yik Fei / Bloomberg via Getty Images)



“No court has ever ruled on whether there has been bribery and corruption and whether MTN acted unlawfully. We have all this evidence against MTN and no court has looked at it to determine what that evidence means,” said Soule.

If the merits of the case are heard, South Africa’s business titans with past links to MTN, including former CEO Phuthuma Nhleko and former executive vice-president Irene Charnley, might be called to testify in court. Nhleko and Charnley are named, among other MTN entities, as respondents in the case.

Turkcell alleges that the former executives played a central role in paying off senior Iranian and South African officials to illegally oust it from the company that would later become MTN Irancell, the holder of the lucrative licence in Iran. Nhleko, Charnley and MTN have consistently denied Turkcell’s allegations of bribery and corruption.

If the appeal court rules in favour of Turkcell and the merits are eventually heard, the company wants at least $4.2-billion in damages from MTN – an amount it said involves lost business opportunities, turnover and profits Turkcell could have made if it had not been booted from the licence.

History of the matter


In about 2004, the opportunity for the licence in Iran was considered lucrative because the country’s telecom industry was underdeveloped and a virgin territory in terms of cellphone penetration. At the time, Iran had a population of about 70 million, most of whom did not own a cellphone. Arguably, MTN benefited from a first-mover advantage.

Turkcell, through its subsidiary, the East Asian Consortium (EAC), approached a court in Tehran in 2005 after it was booted out as a stakeholder in the consortium that was to become Irancell, in which MTN now has a minority shareholding (49%).

That court application was dismissed in 2006. It was at this point that the EAC accused MTN of bribery and corruption. Turkcell’s central accusation was that MTN allegedly made payments to South Africa’s then ambassador to Iran, Yusuf Saloojee, to lobby for the licence to be awarded to MTN. Nhleko and Charnley, according to Turkcell, also authorised former MTN Irancell director Chris Kilowan to promise other high-ranking officials in Iran further inducements.

An independent committee appointed by MTN in 2012 cleared the company of wrongdoing in Iran. The committee also cleared Nhleko and Charnley of wrongdoing, and found that MTN had made no payments to Saloojee.

Turkcell A pedestrian stands in front of a street advertisement for Turkcell services in the Levent district of Istanbul, Turkey, on 23 December 2023. (photo: Kerem Uzel / Bloomberg via Getty Images)



Turkcell and the EAC were not happy about the committee’s findings, and in 2012 they approached the US courts to sue MTN. However, they dropped the case after learning during proceedings that the supreme court in the US had issued a ruling limiting the jurisdiction of US courts in foreign disputes.

As a result, Turkcell and the EAC refiled the case against MTN in South Africa.

At the High Court in Johannesburg, the case dragged on until November 2022, when it was tossed out on grounds of jurisdiction. Most aspects of Turkcell and the EAC’s lawsuit, including tender conditions for the telecom licence and alleged bribes paid, happened in Iran. Because of this, the court found that Iranian and not South African laws should be used to test the allegations against MTN.

Read more: MTN Has First Loss Since 2016 as Naira’s Slump Hits Biggest Unit

Now Turkcell and the EAC are asking the appeal court in Bloemfontein to overturn the high court’s ruling. Asked why the companies are not pursuing the case in Iran, where there is jurisdiction, Soule said they wouldn’t get a fair hearing in the country.

“The courts are controlled by the government in Iran, and we are alleging that MTN and other defendants paid bribes to Iranian officials and corrupted the award of the licence. The other significant reason is that the MTN defendants are all residents in South Africa and they have no obligation to come to Iran.”

MTN’s argument


In new court papers, MTN argued that the appeal court should also dismiss Turkcell and the EAC’s case on grounds of jurisdiction.

“The court reasoned that the conduct forming the basis of the delict occurred in Iran. That was where the delict was put into effect. The reasoning is respectfully unassailable.

“The EAC has attempted to sue the government of Iran and MTN in Iran, the US and at two international tribunals. It failed every time,” said MTN’s counsel, who added that the company’s own independent commission found no evidence of wrongdoing.

Other arguments MTN advanced are that courts in South Africa should not rule on certain issues involving foreign states and affairs, and that a clause in Iran’s tender regulations requires disputes about the award of tenders to be lodged in Iran. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.

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