Alfa Telecom makes $2.8bn offer for stake in Turkcell

Mar 17, 2015, 4:30 PM EDT
Turkish national flag flies during during a southwester weather near Marmara Sea, in Istanbul, Turkey on February 01, 2015.q
Anadolu Agency/Getty Images

Russia's Alfa Telecom offered $2.8 billion on Tuesday to buy a 13.8% stake in Turkcell, Turkey's top mobile operator. The Wall Street Journal reports that Alfa TelecomTurkey Limited, a subsidiary of Russian oligarch Mikhail Fridman’s conglomerate, has offered $54.9 million a share for a 13.8% stake in Turkcell owned by Cukurova Holding AS. The stake is held by Turkish bank TC Ziraat Bankasi AS as collateral for a loan issued to Cukurova. If Alfa’s bid is successful, it would effectively take control of Turkcell, which is the dominant player in Turkey’s booming cellphone market. Alfa already holds a large interest in Turkcell via a series of holding companies.
Cukurova’s billionaire owner, Mehmet Emin Karamehmet, has yet to accept the offer and if he does the deal could be blocked by the Turkish government. Turkish regulators appointed five people to Turkcell’s seven-member board in 2013 and the government has repeatedly said that Turkcell is a strategic national asset, signaling that they are unlikely to approve a Russian takeover.
Turkcell has been at the center of a dispute between the three main shareholders -- Alfa, Cukurova, and TeliaSonera AB -- after Alfa seized a Turkcell stake when it said Cukurova defaulted on a 2005 loan agreement for which the shares were pledged as collateral, according to Bloomberg. Privy Council, a court for such disputes, resolved the disagreement in 2013, allowing Cukurova to find loans to repay $1.6 billion of debt to Alfa. Alfa already owns 13.2 percent of Turkcell and Swedish phone carrier TeliaSonera holds 38 percent. Turkcell has failed to pay dividends since 2010 because of the dispute among shareholders. Turkcell shares rose as much as 3.6 percent in Istanbul, the steepest intraday advance since Feb. 11, and were trading 2.4 percent higher at 12.85 liras at 5:12 p.m., valuing the company at 28.3 billion liras ($10.8 billion).
"It is therefore highly unlikely, for strategic and national security reasons, that the government would let the Turkish controlling shareholder sell its stake to a Russian (or any other foreign) entity," said Ondrej Cabejsek, an analyst at Czech firm Wood & Company Financial Services, in a note cited by Reuters. Alfa could be using its bid to put renewed pressure on Cukurova."Alfa, knowing that it is likely never to be allowed by the Turkish authorities to buy Cukurova's stake, might therefore be trying to force Cukurova to buy Alfa's stake, and at a hefty premium at that," said Cabejsek, who has a "sell" on the stock.