Iran deals forced Patel to quit

In an almost unprecedented move among blue chip companies, MTN revealed on Monday (29 July) that Patel had resigned "with immediate effect" after a preliminary investigation had apparently highlighted numerous governance breaches.

MTN revealed nothing more sparking speculation over what Patel may have done. MTN tried to put on a brave face by immediately announcing Brett Goschen as Patel's replacement and pledging that it would have "no impact" on its financial performance.

But Business Times established that the investigation into Patel revolved around how he allegedly broke MTN's procedures in transferring its cash out of Iran through Dubai. Investigative teams in Dubai and Iran are understood to be scrutinising the case and have handed a draft report to the board.

It is the second scandal to emanate from MTN's Iranian business after the bribery allegations from Turkcell.

No illegal activity

Details remain sketchy about the reasons for Patel's resignation though MTN executive Paul Norman said no illegal activity had been flagged.

"At this stage, there is no indication that money has gone missing and it's not as if anything that happened was illegal or broke any international sanctions. It's just that there are certain governance issues that may not have been followed," he said.

Norman said the company decided to accept Patel's resignation, though the investigation was not conclusive, so that there "would be no sense of a cloud of suspicion hanging around".

"It's too early to say if he would have faced a disciplinary hearing, but ultimately, it would have been tough for him to fulfil his role if he'd stayed, given this process," Norman said.

MTN has faced a huge headache in seeking to get dividends out of Iran because stringent sanctions prevent banks from moving cash easily in and out of the country.

MTN 'printing' money

MTN, which plans to spend R28bn this year to expand its network infrastructure, was virtually printing money in Iran, where it has a 46% share of the market.

Last year, MTN Irancell collected R24bn in revenue, making R10.6bn in earnings before interest, tax, depreciation and amortisation - a healthy profit margin of 44%.

The company's chief executive Sifiso Dabengwa has spoken repeatedly about MTN's desire to come up with ways to repatriate up to R1.2bn of cash trapped in Iran, which entailed tough negotiations with Iran's central bank as well as US authorities.

"It is not as if [Patel] did anything which, the way we understand it now, was motivated by malice," said Norman.

Analysts seem to be largely unworried about the issue.

"The feedback I've been receiving from inside the company is that he hasn't been caught with his hands in the kitty, and that the investigation is related to a corporate governance issue which won't have an impact on MTN's financials," one analyst said.

"Frankly, I'm not too concerned about it, and I'm very happy about the appointment of Brett Goschen. He is great head office material."

Over the last four years, MTN paid Patel more than R37m in salaries and bonuses. Last year, for example, he earned R13.8m, including a R6.4m bonus. The previous year, he made R14.7m, and also cashed in shares worth R2.4m.

Source: Business Day via I-Net Bridge