Steering South African telecoms group MTN for nine years, Phuthuma Nhleko amassed quite a reputation for the successes the company achieved under his leadership. However, since leaving his position as Group CEO last year, Nhleko has been plagued with criticism and accusations of corrupt practices while at MTN.
Iran is at the centre of the controversy. MTN currently awaits the verdict of a US court in a $4.2 billion case involving allegations of corruption and assistance in arms dealing with respect to MTN’s unit in Iran – MTN Irancell. The claims are numerous and extremely serious, and all alleged to have taken place with the direct consent of Nhleko.
In 2004, MTN won a lucrative mobile telecoms network operating licence from the Iranian government – only the second private sector licence to be granted in the country. It is alleged that the licence was granted to MTN through a series of bribes. Although rival (and accuser) Turkish operator Turkcell originally won the tender, in a mysterious turn of events, MTN Irancell – a consortium in which MTN is the largest shareholder with 49 percent – won the final licence. Turkcell now wants compensation for the lost contract, and has made some serious allegations about MTN.
These allegations have flown around at an incredible pace. South Africa’s Ambassador to Iran Yusuf Saloojee is accused of taking $200,000 to influence Iran’s reputation at the International Atomic Energy Agency (IAEA) and as such has been suspended from duties, while Iran’s deputy foreign minister Javid Ghorbanoghli is accused of pocketing $400,000 in return for manoeuvring Turkcell out of government favour.
Witnesses have testified that MTN introduced Iranian defence officials to South Africa’s one time defence minister Mosiuoa “Terror” Lekota with a view to providing Iran with arms despite a UN arms embargo. Furthermore, MTN reportedly was responsible for acquiring numerous western technologies from US-based companies Sun Microsystems, Hewlett-Packard and Cisco Systems, despite an explicit US trade embargo banning the export of technologies to Iran.
Untangling the web of claims will be the court’s job, but serious damage has been done to Nhleko’s reputation by the allegations. While the former CEO has come forward and categorically stated that no such corrupt activities went on with his consent during his time at MTN, it doesn’t help matters that former MTN executive Chris Kilowan has stepped up as the key witness in Turkcell’s attack – maintaining under sworn oath that he was involved with and witness to all the allegations until he became disenchanted with MTN, which was failing to pay him back bribe monies.
Either way the news is not good for MTN: either the allegations are true, or a former employee was so unhappy with his treatment that he is happy to trash the company under oath. The latter explanation is naturally preferable for MTN, but either way Nhleko’s record has earned a few smudges through the whole process. It is not just his reputation that stands to be tarnished. Should the arms allegations turn out to be true, the South Africa government would come under significant fire.
Despite the controversy, MTN Irancell nonetheless recently reported good growth in the half year leading to year end in June, stealing a 47 percent market share in Iran, as opposed to 45 percent in late 2011. The company could also report an increase in its subscriber base, leaping to 38.3 million users, up from 34.7 million at the end of last year.
Irancell’s success is vital to the MTN Group – with the Iranian company growth meaning it now accounts for a substantial segment of MTN’s global revenue. In 2011, MTN reported that Irancell was responsible for 9 percent of its global revenue, the Iranian venture bringing in $1.3 billion for Africa’s largest mobile telecoms company.