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MTN – More than a corruption and bribery accusation

By Diligencia
6 March 2019

Business and politics are seldom unconnected in emerging markets, particularly in strategic infrastructure sectors such as telecoms. So when relations between nation states ebb and flow, the fate of those countries’ commercial players often rise and fall in tandem.

On Friday 15 February 2019 the South African Hawks (Directorate for Priority Crime Investigation) announced the arrest of the former ambassador to Iran Mr. Yusuf Saloojee. Mr. Saloojee is accused of facilitating bribes on behalf of the South Africa–based MTN Group Ltd to both Iranian and South African officials. These bribes allegedly resulted in the cancellation of an Iranian-government license granted to MTN competitor Turkey-based Turkcell in 2005. The MTN group has denied these claims, highlighting that the key witness in the case is a disgruntled former employee. The accused Mr Saloojee will appear before the Johannesburg Specialised Crimes Court on 17 April 2019.

MTN’s presence in the Iranian market is through a 49% stake in Irancell Telecommunication Services Company which is majority owned (51%) by the Iran Electronic Development Company, that is ultimately owned by Islamic Revolution Mostazafan Foundation. This 49% stake had originally been awarded to Turkcell before the cancellation of their government licence. Turkcell have pursued legal action against the MTN Group through numerous channels since 2012 including, most recently, through the South African High Court in 2017.

Other operational difficulties for the MTN Group comprises legal action on multiple fronts, including from their Nigerian and Ugandan operations. The telecommunications giant is accused of evading US$2 billion in taxes in Nigeria, whilst the CEO of MTN Uganda Ltd Mr. Wim Vanhelleputte was deported on 14 February 2019 over allegations that he was a threat to national security.

In 2016, MTN was fined US$1.7 billion by the Nigerian government following a failure to comply with regulations requiring SIM-card holders to be registered. Nigeria and Iran are the two largest markets for MTN operations and the re-enactment of US sanctions against Iran in March 2018 has complicated the repatriation of funds from some 44.5 million subscribers.

The decision to terminate the relationship with Turkcell was almost certainly influenced by the political climate, given the majority state-ownership of the Irancell Telecommunication Services Company. It is worth noting that the individual responsible for introducing the MTN Group to the Iranian telecommunication industry was Hamid Reza Aref, whose father, Mohammad Reza Aref was the active vice-president at the time. Mohammad Reza Aref is currently an active member of parliament and current head of the Hope Fraction party. Furthermore, in 2012, when legal action against MTN was first launched by Turkcell, Iranian relations with Turkey were in a poor state.

Further political entanglements are present in the form of current South African-president Cyril Ramaphosa who was chairman of the board at the MTN Group from 2002-2013. The alleged bribes were supposedly paid on behalf of MTN in April 2007.

Set against the broader political context, there is clearly more to this case than a disgruntled former employee with a grudge against the company. With relations between Turkey and Iran now thawing, it is likely that this saga may yet have some way to run.

Diligencia

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Diligencia provides specialist business intelligence and due diligence services based exclusively on primary sources in the Middle East & Africa.

More about what we do