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Turkcell withdraws corruption case in US against MTN over Iranian license

In wake of US Supreme Court ruling on foreign cases

Though Turkcell has withdrawn a $4.2 billion lawsuit against MTN Group in a U.S. court, allegations about MTN's activities in Iran may still dog the South Africa-based company.

MTN was facing corruption allegations over its dealings in Iran, where according to Turkcell it bribed some officials to acquire a telecom license. MTN denied the charges and last year appointed a committee of investigators, chaired by retired British judge Leonard Hoffmann, which cleared it of the allegations.

But Turkcell took the matter to the U.S. District court for the District of Columbia for determination. The court delayed its ruling on the matter pending a U.S. Supreme Court decision on whether such matters can be heard in the U.S.

However, the Supreme Court ruled last week that U.S. courts may not hear alleged corporate misconduct that took place outside the U.S. and brought by foreign corporations.

In a Wednesday filing, lawyers for Turkcell asked to dismiss the case in light of the Supreme Court ruling.

The Istanbul-based Turkcell alleged that in 2004, MTN improperly paid bribes to South African and Iranian government officials to win an Irania telecom license in 2005. The license had initially been awarded to Turkcell by the Iranian authorities after a tender in 2003. Turkcell was however prevented from securing the license and instead MTN, which had submitted a runner-up bid, received it.

Turkcell also accused MTN of promising Iran that MTN could deliver the South African vote at the International Atomic Energy Agency (IAEA) in support of the country's controversial nuclear program.

Turkcell's allegations come against the backdrop of the Western countries' forceful economic sanctions, designed to deter Iran from pursuing its nuclear development program.

Turkcell said it decided to file the lawsuit against MTN in the U.S. because both companies have extensive business dealings in the U.S. and because it alleged that MTN breached international law.

MTN has welcomed the decision by Turkcell to drop the lawsuit and said, "it lacked legal merit and that there was no basis for it to brought before the US court."

"Turkcell's decision to drop their claim was expected, however we welcome it," said MTN Group President and CEO Sifiso Dabengwa in a statement.

The Iran unit is MTN's fastest growing affiliate, with over 34 million subscribers. MTN has a 49 percent share in Irancell, owned and controlled by Iran Electronic Development Company.

Backed by a collection of alleged MTN internal documents including e-mails, invoices, memos and presentations, Turkcell accused MTN of a "staggeringly brazen orchestra of corruption."

But MTN insisted it was not the cause of Turkcell losing the license in Iran as the company was claiming. The company said Turkcell's own "failures to meet Iranian legal and commercial requirements" caused its exit from the license process.

MTN engaged Hoffmann in February 2012 in a bid to resolve the dispute with Turkcell outside the court. Turkcell refused to cooperate with the Hoffmann's investigations.

The allegations still cloud MTN's reputation, according to some industry watchers.

"The fact that Turkcell has withdrawn the case does not clear MTN of the wrongdoing in the manner it acquired the license in Iran," said Edith Mwale, a telecom analyst at the African Center for ICT development told Computerworld Zambia.

She pointed out that Turkcell only withdrew the matter from a U.S. court on a technicality.

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