Washington/Johannesburg - For a South African
telecommunications company, it represented a unique chance to seize what its
chief executive called "one of the most significant 'virgin' mobile
opportunities in the world."
But the location, he added in a memo marked Strictly
Confidential, was "no normal country".
The country was Iran. The company, MTN Group [JSE:MTN], 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 cellphone 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 in damages. The Hawks is
investigating. MTN has denied the allegations and called Turkcell's demands
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. In 2011, MTN generated $1.3bn, 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 7 000 pages
of internal MTN documents related to "Project Snooker" - MTN's code
name for its effort. "We said we are going to snooker Turkcell,"
MTN, now Africa's largest mobile phone carrier, has called
Kilowan "a disgruntled former employee" and has termed his
During three days of sworn testimony in Washington that
concluded May 2, Kilowan presented an extraordinary tale of a multinational
company so intent on winning a contract, it was willing to help Tehran obtain
military hardware, sway South Africa's votes before the United Nations'
International Atomic Energy Agency and pay bribes, sometimes in the guise of
MTN has yet to give evidence in the case, which is
continuing and may go on for years.
Kilowan admitted fronting $200 000 of his own cash to reward
South Africa'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 convinced
him to cooperate with Turkcell.
Saloojee, now South Africa's ambassador to Oman, didn't
respond to requests for comment. Other South African officials denied Kilowan's
Reuters has reviewed the entire transcript of Kilowan's
deposition, most of which has not been made public, as well as numerous other
The dramatic testimony comes at a time when the Western
world is trying to contain Iran with forceful sanctions intended to deter its
nuclear development programme, which Iran maintains is peaceful.
After choking off Iran's banks from the international monetary
system, the European Union plans to implement an embargo on Iranian oil and a
ban on insuring oil cargoes on July 1.
The sanctions haven't been leak-proof. Reuters has
documented in a recent series of articles how Iranian telecoms - including the
MTN joint venture - have managed to obtain embargoed US computer equipment
through a network of Chinese, Middle Eastern and Iranian firms.
The Turkcell-MTN case offers further evidence that there are
always companies willing to do business with a country even when it becomes an
That goes for some governments as well. The African National
Congress has long maintained close ties with Tehran, which during the 1980s
supported the anti-apartheid underground and imposed a trade boycott on the
In an interview last month with Reuters, Gwede Mantashe, the
ANC's secretary general, said he had "no problem at all" with South
Africa "trading anything" with Iran today, including weapons.
"I will talk to my people"
Kilowan's story begins in 2004 when MTN sent him to Iran.
MTN had seemingly lost out to Turkcell for the licence to launch what would be
the country's second cellphone operator.
He testified 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. At the time, Iran had just one
mobile operator, Telecommunication Co of Iran.
Kilowan said he learned from Ambassador Saloojee, who
recently had arrived in Tehran, 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
He portrays Sairan and Mostazafan, which eventually teamed
up with MTN, as manipulative and untrustworthy, and later 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".
Officials at Sairan and Bonyad Mostazafan could not be
reached for comment, and Iranian diplomats in South Africa and New York did not
respond to requests for comment.
Kilowan said he and two South African diplomats held an
initial meeting around March 2004 with a Sairan official, who complained that
South Africa had failed to deliver military radios Iran had purchased a year
"You should push your government that they must sell
these things to us," Kilowan quoted the Sairan official as saying. "I
said, 'Okay, I will. I will talk to my people, and they will talk to the
MTN had longstanding connections to the South African
government through the ANC, Kilowan testified. These ties are well documented:
MTN was set up with government help in 1994 as one of the first black-owned
companies after the end of apartheid.
Many MTN officials, including chairperson Cyril Ramaphosa,
had been ANC activists during the struggle to end white rule. Ramaphosa has
long been seen as a potential president of South Africa.
A spokesperson for Ramaphosa referred Reuters back to MTN,
which in turn referred to his public statements on the matter. Ramaphosa
announced in February that MTN had set up a special committee to investigate
Turkcell's claims, saying, "MTN has zero tolerance for corrupt and
unethical business practices".
Kilowan testified that during meetings, the Iranians - people
at Sairan and other government officials - repeatedly raised two requirements:
their need to acquire military hardware, including drone aircraft, and to win
support for Tehran's nuclear development 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
access to high-level South African government officials. This included helping
to arrange a visit to Iran by South Africa's then defence minister, Mosiuoa
Lekota, to meet his Iranian counterpart.
Lekota visited Iran in August 2004, accompanied by MTN
director Charnley and its then chief executive, Phuthuma Nhleko, Kilowan
"It was specifically arranged so as to prove to the
Iranians that MTN can deliver on the defence matters," said Kilowan, who
noted he was in South Africa at the time.
Nhleko, who left MTN last year, told Reuters in an email:
"It is really not for me to comment on the visits abroad of South African
In response to emailed questions, Charnley, who left her
executive post at MTN in early 2007, said: "Turkcell’s allegations are
entirely without substance.
"Neither I nor MTN were in a position to influence the
policies or decisions of the South African or Iranian governments, and we did
not do so."
An Iranian news agency account of defence minister Lekota's
two-day visit reported that he told a news conference that Iran had a right to
pursue peaceful use of nuclear energy.
The Iranian defence minister, Ali Shamkhani, said the two
sides had discussed expanding military, economic and political ties, and had
signed an agreement to expand bilateral cooperation.
In an interview with Reuters, Lekota said he travelled to
Iran "on official business" and was not working on behalf of MTN.
"I have never had anything to do with the MTN
licence," he said. Asked the nature of the visit, he replied, "You
are subjecting me to a cross-examination of issues that happened some time
ago... I don't have access to those documents now."
Asked about the documents, Lindiwe Sisulu, until this week
the defence minister, said her office received none of Lekota's records when he
resigned in 2008. "I'm therefore not able to answer on his behalf what it
is that he was doing" in Iran, she said.
According to Kilowan, Ambassador Saloojee later showed him a
wish list of arms the Iranians wanted to buy from South Africa. The shopping
list included radar systems, armoured personnel carriers, long-range cannons
and the Rooivalk attack helicopter.
Kilowan testified that Saloojee told him, "They want
everything from the earth to the sea, and everything that is in the sea and
everything that flies."
Kilowan said Iranian officials also directly told him they
wanted help in acquiring military equipment, including helicopters and drone
aircraft. He said he and MTN director Charnley worked to contact South African
defence contractors to help deliver to Iran what MTN executives code-named
"the fish" - weaponry.
"We were not promising to facilitate the arm
sales," Kilowan testified. "We were promising to get them in front of
the right people for these arm sales. And if there are any bottlenecks, we
would talk to the minister, for example."
Charnley said: "The first time I heard the phrase 'the
fish' in this context was when my attorneys briefed me on the Turkcell
allegations in 2012." She denied she tried to help Iran secure arms from
To support Kilowan's allegations, Turkcell's lawyers have
submitted what they say are internal MTN documents from his computers.
The evidence includes an alleged fax from Charnley in
November 2004 to the head of Sairan stating she was trying to set up a meeting
about the helicopters between government-owned defence contractor Denel and an
Iranian helicopter company.
The document says it was "signed on her behalf by
Nkateko Nyoka", another MTN executive.
Charnley disputed the fax's authenticity. "I didn't
send any such fax, am not aware of any such fax having been sent, and I never
asked anyone to send such a fax on my behalf," she said. Nyoka, no longer
with MTN, said in an interview he didn't know anything about the document.
Turkcell's documents also include an alleged fax to an
Iranian official from Donald Ramfolo, then a Denel regional marketing manager,
stating, "We at Denel feel honoured to have received your request for
cooperation in the helicopter support field."
In an interview, Ramfolo said Denel had proposed selling
Iran "aviation technology", including fibreglass technology for
drones, but MTN wasn't involved and the South African government nixed the
"We were doing our own thing and MTN were doing their
own thing and we didn't mix,” he said. Ramfolo no longer works for Denel. A
spokesperson for Denel did not respond to requests for comment.
Turkcell's evidence also includes an alleged signed
agreement between MTN and its Iranian partners from September 2005 that states:
"The cooperation between MTN and Iranian shareholders should be in the
line of defensive, security and political cooperation.
"MTN shall fully support cooperation regarding the
aforementioned issues in South Africa."
Kilowan testified that the Iranians were insistent on that
clause and that Nhleko signed the agreement.
Kilowan said it meant "that we would continue to provide
support to Sairan in particular around defence matters and we would continue to
provide political support or get political support from the South African
government for the Iranian government".
Asked to comment, Nhleko said, "Neither the MTN Group
nor I were in a position to influence or fetter the decisions and foreign
policy of the South African government, and we did not do so."
"A lot of pressure"
In the end, South Africa never delivered any arms. In the
case of the attack helicopters, Kilowan testified that Saloojee told him South
Africa wouldn't sell them to Iran because they contained some American
technology, which was under sanctions.
Kilowan said the failure to deliver the arms resulted in
continued friction between MTN and the Iranians. "The non-delivery of the
full fish continued to be a discussion long after," he testified.
MTN was pressed to deliver in other ways. On the nuclear
front, Kilowan testified that MTN helped pay for a trip to South Africa around
late 2004 by Iran's then-chief nuclear negotiator, Hassan Rowhani, so he could
meet with then-president Thabo Mbeki.
"We paid for the hotels in Cape Town. We paid for the
dinners, everything. We bought presents for them. And we made sure that he got
to see president Thabo Mbeki," Kilowan testified. Rowhani could not be
reached for comment.
Mukoni Ratshitanga, a spokesperson for former president
Mbeki, said, "We're not going to be drawn into commenting on these
According to Kilowan, MTN was promised the telecom licence
in November 2005. But when he arrived to pick it up, he said an Iranian
official told him that it couldn't be issued until a vote later that week at
the International Atomic Energy Agency in Vienna.
Members were considering whether to refer Iran, which had
resumed developing enriched uranium, to the UN Security Council for possible
South Africa abstained. Several days later, MTN received the
licence. Kilowan testified that although MTN couldn't claim credit for the
abstention, "we essentially put a lot of pressure" on the government.
The South African government has denied MTN played any role.
By the time MTN received the licence to launch the new
telecom, called MTN Irancell, it had made a series of concessions to its
Although MTN owned 49% of the joint venture, it agreed to
put up 100% of the licensing fee and capitalisation costs - $570m in all. By
Kilowan's account, the Iranians essentially tricked MTN into signing a document in Farsi that committed it to
paying all its partners' share.
Neither MTN nor its partners have commented on this
Over the objection of MTN's chief financial officer at the
time, Rob Nisbet, MTN structured its additional contribution as a complex
series of loans, Kilowan testified. Nisbet, who has since left MTN, declined to
Kilowan said he also objected to the loan arrangement. In a
confidential October 2005 memo to MTN's CEO that was reviewed by Reuters,
Kilowan wrote, "They have no intention whatsoever to repay the money that
they want us to advance them."
He also wrote, "I have now arrived at the conclusion
... that the primary reason they have shifted to MTN is because they have
concluded that we are desperate enough for this licence that we will give
MTN's financial statements show that the loans, originally
supposed to be repaid by 2009, were renegotiated and extended. The company
recently reported that three of four loans were repaid last year, with the
fourth extended until 2014.
Among Kilowan's most serious allegations is that MTN paid a
series of bribes, including to Javid Ghorbanoghli, an Iranian deputy foreign
minister who had once served as Iran's ambassador to South Africa.
Kilowan also alleges that payments were made to Ambassador
Saloojee and six Iranian government employees he declined to name.
At a meeting at Kilowan's Tehran house in May 2005, Kilowan
testified Charnley told Ghorbanoghli: "Look, we are now entering a very
delicate phase. We would really appreciate all your assistance that you can
"And, of course, when we get the licence we will be
very happy to thank you in the appropriate way for your assistance."
Within months, Kilowan said, the Iranian diplomat began
asking him about "compensation". Kilowan said he and Charnley agreed
to wait until after MTN received the licence.
After the licence was issued, Charnley suggested Saloojee
also should be paid for assisting MTN, Kilowan testified.
Charnley denied this, stating, "I didn't bribe anyone,
I'm not aware of anyone having been bribed, and I wouldn't have tolerated any
bribery had I been aware of it."
According to Kilowan, Ghorbanoghli grew agitated in 2006
over not having been paid, saying he needed money to buy a house for his
children in South Africa. Kilowan said he and Charnley decided to pay him by
awarding a consulting contract to an oil services company in Dubai owned by one
of Ghorbanoghli's friends.
Turkcell's evidence includes a copy of an agreement signed
by Kilowan on behalf of MTN International, a unit of MTN Group, to pay $400 000
to Aristo Oil International Services for "consulting services"
related to "MTNI's entry into the Iranian Mobile Market".
Ghorbanoghli later confirmed the money had arrived, Kilowan
testified. "He wanted more, and I negotiated it down to 400 000," he
Ghorbanoghli couldn't be reached for comment. Aristo's
managing director, Mousa Hosseinzadeh, whose name and alleged signature appear
on the documents, asked Reuters for copies and then didn't respond to requests
As for Saloojee, Kilowan testified that the ambassador
approached him after learning that Ghorbanoghli had been paid. Saloojee said he
needed money to buy a house in Pretoria, Kilowan said.
Kilowan testified that MTN delayed making the payment so he
ended up giving Saloojee $200 000 of his own money in April 2007, through the
ambassador's attorneys, with a handshake agreement that Saloojee would repay
him when MTN sent the cash.
It never did. Kilowan, who left MTN in late 2007 and is now
a Dubai-based businessman, testified that he continued through early 2011 to
try to recoup his money from Saloojee and MTN. When the company turned him
down, he said, he decided to cooperate with Turkcell.
He testified he does not stand to benefit from the case’s
outcome, other than travel expenses and compensation for time spent on his
deposition and "loss of business".
He also said he bills Turkcell an hourly rate for reviewing
documents in a separate arbitration case, and has received about $21 800 over
the past year. As a result of this disclosure, MTN, which is trying to dismiss
Turkcell's lawsuit in the United States, recently called his testimony
Meanwhile, MTN Irancell has become Iran's fastest-growing
mobile phone operator. MTN recently reported it had 45% of the Iranian market.