S Africa's Foreign Ministry Suspends Former Iran Ambassador On MTN

Date : 07/12/2012 @ 5:13AM
Source : Dow Jones News
Stock : Turkcell Iletisim Hizmetleri As (TKC)
Quote : 9.87  0.35 (3.68%) @ 9:36AM

S Africa's Foreign Ministry Suspends Former Iran Ambassador On MTN

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By Devon Maylie

JOHANNESBURG--South Africa's foreign ministry confirmed Thursday that it suspended the country's former ambassador to Iran amid allegations he accepted a bribe from mobile phone operator MTN Group Ltd. (MTN.JO) to help it attain a license in the country back in 2005.

In an escalation of events around accusations that the mobile operator engaged in corruption, a spokesman for South Africa's foreign ministry said Yusuf Saloojee, who was South Africa's ambassador to Iran at the time MTN was negotiating a license, was suspended at the start of July. The foreign ministry is carrying out an investigation into whether Mr. Saloojee engaged in any wrongdoing.

The former ambassador's suspension comes after Turkey's largest mobile phone operator, Turkcell Iletisim Hizmetlera AS (TKC), filed a lawsuit in the U.S. District of Columbia against MTN in March seeking $4.2 billion in damages as a result of losing out against MTN for the license. Turkcell alleges that MTN engaged in bribery and other acts of corruption to secure the license, including authorizing a $200,000 bribe to Mr. Saloojee.

MTN, which said Turkcell's lawsuit has no legal merit and filed papers to get the case dismissed earlier this month, holds a 49% stake in Irancell, Iran's second biggest mobile phone operator, with the government as its partner. Turkcell lost out to MTN in 2005 in securing the license, the second to be tendered in Iran. About 21% of MTN's subscribers are in Iran and the company says it's one of its fastest growing businesses.

South Africa and Iran have a fraught relationship. South Africa relied on Iran for about 25% of its crude oil imports but came under pressure from the U.S. and Europe to reduce what it buys this year amid new sanctions aimed at cutting off funding to what the U.S. says is a nuclear weapon development program in Iran, something Iran denies. Due to the pressures coming from the U.S. and Europe, South Africa's Sasol Ltd. (SSL), the world's largest coal-to-motor-fuel producer, said it stopped buying Iranian crude oil and is sourcing more Saudi Arabian crude in its place.

The Turkcell case is the latest problem for MTN's Iran operations. A Wall Street Journal report last year alleged that MTN enabled the Iranian government to track mobile phone users through surveillance technology sourced by the company. MTN said all operations have the technology that would enable companies to track phone users and what governments decide to do with it is out of the company's hands.

MTN wasn't available to comment Thursday about the ambassador's suspension but has said it's carrying out its own investigation into the allegations, with Chief Executive Sifiso Dabengwa saying last month it doesn't "tolerate illegal or corrupt practices."

South Africa's foreign ministry suspension decision comes after a deposition made for the U.S. case by Chris Kilowan, Turkcell's key witness and a former MTN executive in Iran, accusing the South African mobile phone company of bribing officials from Iran and South Africa.

Mr. Kilowan alleged in the deposition taken in May that MTN encouraged the South African government to support Iran's nuclear power development program in exchange for offering support in its bid for the license.

He also claimed that MTN approved improper payments to Iranian officials and to South Africa's former ambassador to Tehran to influence the license process, including authorizing Mr. Kilowan to directly pay Mr. Saloojee the $200,000. Mr. Kilowan says MTN never repaid him for that money.

The South African government had previously denied the claims. Mr. Saloojee has denied the allegations in local media.

MTN has described Mr. Kilowan as a "disgruntled" employee. Mr. Kilowan has admitted to having been paid by Turkcell to consult on its case against MTD and said he had disagreements with MTN's management at the time he worked there.

In June South Africa's special police investigative unit said it's also investigating the bribery allegations against MTN.

Write to Devon Maylie at devon.maylie@dowjones.com

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