Turkcell tension exposed as LetterOne levels nationalisation claim

Tension between the Russian billionaire Mikhail Fridman and the Turkish government has burst into the open, with Mr Fridman's LetterOne Group claiming that Ankara has "quasi-nationalised" Turkcell, Turkey's biggest mobile phone operator.

In an interview with the Financial Times, Alexey Reznikovich, managing partner of LetterOne Telecom, a big Turkcell shareholder, claimed that regulator-appointed directors and a loan from a state bank had ensured Turkish state control of Turkcell.

"We cannot continue with the company the way it is going because it has been quasi-nationalised," Mr Reznikovich said. "The investors are just sidelined."

The dispute over the Turkish state's role in Turkcell, which was privately founded and is listed in Istanbul and New York with a TL30bn ($11.6bn) market capitalisation, has flared up as Ankara has been increasingly criticised for authoritarianism.

Some business leaders complain privately that President Recep Tayyip Erdogan is seeking to bolster his influence over the corporate sector. A series of government actions have also indicated Ankara is reluctant to see Turkcell, a flagship company, under foreign control.

"We have invested a lot of money, we don't have any say and the Turkish government with the five independent directors who are close to the government, take all the decisions," Mr Reznikovich said.

He claimed that shareholders had not even been consulted about the departure in January of Sureyya Ciliv, the company's former chief executive.

Turkcell said such claims were "subjective and unfounded". The Turkish ministry of transport and telecoms said: "We cannot comment on a private company; it is nothing to do with us."

Last month, LetterOne bid $2.8bn to buy the controlling stake in Turkcell from the Cukurova conglomerate of Mehmet Emin Karamehmet, one of Turkey's best known businessmen. The price was almost twice what Turkcell shares were trading at the time.

Mr Fridman's group argues that under the terms of a previous agreement with Cukurova, the Turkish conglomerate must by April 12 accept the bid, make a counter-offer at the same terms for LetterOne's slightly smaller stake, or take the issue to arbitration.

The Cukurova stake Mr Fridman's bid is seeking to buy is in a company that controls Turkcell through a pyramid structure with the equivalent of 13.76 per cent of the shares.

Asked if the bid was in fact an exit manoeuvre, Mr Reznikovich said: "We are agnostic, we established a fair price for the company; at this price we are more than happy to buy Cukurova's stake." He added. "If they want to control the company they should buy us out."

Cukurova has also started legal action against Mr Fridman's group to buy LetterOne's stake at a lesser price, which LetterOne says is around $2bn.

But LetterOne argues that its real interlocutor is Ankara rather than Cukurova, which in recent years has had assets seized by the Turkish state and has pledged its controlling stake in Turkcell as security for a $1.6bn loan from the state-controlled Ziraat Bank.

"This whole situation is a real litmus test for Turkey's policy on foreign direct investment," Mr Reznikovich said. "Turkcell needs to become a normal company."

When asked about parallels with corporate governance - or lack of it - in Mr Fridman's native Russia, Mr Reznikovich replied: "Russians may be rough, but they are reasonably straightforward," citing a law that explicitly forbids foreigners from controlling Russian telecoms groups.

Cukurova did not immediately respond to requests for comment.

Turkcell recently paid out its first dividend in five years after a rare agreement between the main shareholders.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation