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Turkcell sues MTN in South Africa for $4.2 billion in Iran damages

A man walks past the Turkcell head office in Istanbul May 14, 2009. REUTERS/Osman Orsal
A man walks past the Turkcell head office in Istanbul May 14, 2009. REUTERS/Osman Orsal

By David Dolan and Ed Cropley

JOHANNESBURG (Reuters) - Turkish mobile phone company Turkcell has taken to a South African court with its $4.2 billion lawsuit against rival MTN Group, alleging it was the victim of corruption and bribery that caused it to lose a contract in Iran.

Turkcell originally pursued the case against Johannesburg-based MTN in the United States but dropped it in May after a U.S. Supreme Court ruling in a separate case made clear that U.S. courts would not have jurisdiction in a claim involving two foreign firms in an overseas dispute.

In papers filed on Tuesday with the South Gauteng High Court in Johannesburg and seen by Reuters, Turkcell says that MTN, former CEO and current Chairman Phuthuma Nhleko and former executive Irene Charnley "acted wrongfully" and interfered with Turkcell's relationship with the Iranian government over the granting of a mobile license in 2005.

Turkcell accuses Africa's largest mobile operator of "corrupt acts" - including promises of bribes and the giving of gifts to Iranian and South African government officials - to secure the license.

It also alleges that MTN promised to influence the South African government's vote at the International Atomic Energy Agency (IAEA) on Iran's nuclear program in 2005 and 2006.

MTN said in a statement: "Although we don't have details of the case, MTN continues to believe that there is no legal merit to Turkcell's claim and will accordingly oppose it."

Reuters was unable to reach Nhleko or Charnley for comment.

MTN has previously rejected the allegations and appointed a retired British judge to lead an investigation that dismissed the accusations as "a fabric of lies, distortions and inventions".

SANCTIONS

The lawsuit comes as investors were beginning to bet that MTN might be near an end to its problems in Iran, having been unable to repatriate about $450 million in loans and dividends from MTN Irancell, because of sanctions against Tehran.

Its shares rose 2.5 percent on Monday on hopes that Sunday's landmark deal between Iran and six world powers on the country's nuclear program will result in relaxed sanctions and allow MTN to bring home the money.

Its shares were little changed on Wednesday, down 0.5 percent at 194.21 rand at 1351 GMT.

MTN owns 49 percent of MTN Irancell, a joint venture with a consortium controlled by the Iranian government.

The South African group was founded with government help just after the end of apartheid in 1994 and is the biggest and most successful black-run company in the country.

With a market value of $36 billion, it is the second-largest company with a primary listing in Johannesburg.

It also has longstanding ties to government. Former chairman Cyril Ramaphosa is the deputy president of the ruling African National Congress.

Charnley started her career working for Ramaphosa when he built and led the National Union of Mineworkers in the 1980s.

Nhleko is one of South Africa's most prominent executives, having led MTN through a decade of massive growth before stepping down in 2011. He is also chairman of the Pembani Group, which has investments in the mining and petroleum industries.

He took over as chairman of MTN this year, succeeding Ramaphosa, who had stepped down to return to politics.

(Additional reporting by Daren Butler in Istanbul and Pascal Fletcher in Johannesburg; Editing by David Goodman)

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