UPDATE 2-MTN says probe dismisses corruption allegations

* Turkcell filed $4.2 bln lawsuit in U.S.

* MTN accused of bribing government officials

* South African govt investigation ongoing

(Adds reaction, details)

JOHANNESBURG, Feb 1 (Reuters) - An external committee appointed by African mobile phone group MTN to investigate claims by rival Turkcell of corrupt dealings in Iran has dismissed the allegations as "a fabric of lies, distortions and inventions".

The committee, chaired by retired British judge Lord Hoffmann, also found nothing to support claims that MTN had promised to get the South African government to supply Iran with defence equipment in exchange for a telecoms operating licence.

MTN and its local partners won a lucrative licence in 2005 to launch a new Iranian mobile-phone carrier, but the deal became embroiled in controversy when Turkcell filed a $4.2 billion lawsuit in the United States last year.

"Following a critical examination of the evidence, the Hoffmann Committee found that Turkcell's allegations are 'a fabric of lies, distortions and inventions'," MTN said in a filing to the Johannesburg Stock Exchange on Friday.

Turkcell declined to comment.

The Turkish telecoms company's allegations come against the backdrop of the Western world's forceful economic sanctions designed to deter Iran from pursuing its nuclear development programme.

Turkcell claims that MTN won the Iran contract by offering to use its influence in Pretoria to help Tehran to obtain military hardware and sway South Africa's votes at the International Atomic Energy Agency.

Backed by a collection of alleged MTN internal documents including emails, invoices, memos and presentations, Turkcell's lawsuit accuses the South African company of a "staggeringly brazen orchestra of corruption".

EMPLOYEE'S TESTIMONY

Turkcell relied on the testimony of a former MTN employee, Chris Kilowan, who worked at its Iranian operations between August 2004 and November 2007.

Turkcell has also accused MTN of bribing Yusuf Saloojee, who was South Africa's ambassador to Tehran, and Iranian official Javid Ghorbanoghli.

Saloojee has been suspended pending a separate investigation by the South African foreign ministry. A spokesman at the ministry said that the investigation was ongoing and welcomed the outcome of the Hoffmann inquiry.

"South Africa's foreign policy is independent and there is absolutely no possibility of anyone influencing it - not a private person, not a company or entity," spokesman Clayson Monyela said.

The Hoffmann investigation also dismissed allegations that MTN used bribery to win an Iranian operating licence initially awarded to Turkcell.

Hoffmann's committee was unable to determine what happened to a $400,000 payment made into the account of Ghorbanoghli's business partner, MTN said.

A signature by Phutuma Nhleko, then MTN chief executive, authorising the payment was found to be fake, it said.

The Hoffmann inquiry's findings cast doubt over whether Turkcell will be able to proceed with its lawsuit.

"This commission has been investigating the claims and has looked at whatever evidence is available to establish the veracity of the claims. If their investigation has come up with nothing, then it does suggest that these claims are baseless," said Pallavi Ambekar, a portfolio manager at Coronation Fund.

MTN shares were up 0.2 percent at 175.52 rand ($19.65) at 1408 GMT. ($1 = 8.9332 South African rand)

(Additional reporting by Evren Ballim in Istanbul; Editing by Ed Cropley and David Goodman)