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Cukurova to Appeal Ruling Awarding Turkcell Shares to Altimo

Cukurova Holding AS will appeal a decision to award its 13.7 percent indirect stake in Turkcell Iletisim Hizmetleri AS, Turkey’s biggest mobile phone operator, to Russia’s Altimo.

Cukurova will challenge the decision by the higher Caribbean Court at the Privy Council in London, the company said in an e-mailed statement today.

Altimo said yesterday it won a legal case in the Eastern Caribbean Supreme Court, which ruled that Altimo’s appropriation of an extra 13.7 percent of Turkcell share held by Cukurova’s units in return for Cukurova’s $1.35 billion debt to the Russian investor was legal. Altimo, majority owned by Russian billionaire Mikhail Fridman’s Alfa Group, has 13.2 percent indirect stake in Turkcell Iletisim.

“The appeal process may take two years and the current structure ownership may continue,” Erdem Hafizoglu, an analyst at BCG Partners Istanbul, said in a telephone interview. “The legal process is likely to continue pressuring Turkcell stock.”

Turkcell rose 6 kurus, or 0.3 percent, to 8.4 liras at 12:41 a.m. on the Istanbul Stock Exchange. The stock has lost 22 percent since the beginning of the year in Istanbul, compared with a 10.4 percent-loss by the national ISE-100 Index.

Complex Ownership

Cukurova Holding, owned by chairman Mehmet Emin Karamehmet, controls Turkcell Iletisim through a complex ownership structure.

Turkcell Holding, which owns 51 percent of Turkcell Iletisim, is 53 percent by Cukurova Telecom Holding, with TeliaSonera AB (TLSN) of Sweden as holding the remainder. Altimo’s parent Alfa Telecom Turkey Ltd. owns 49 percent of Cukurova Telecom Holding and Cukurova Holding controls 51 percent.

“If Altimo finally wins the court case and raises its stake to 27 percent in Turkcell, it may prefer policies of more growth with acquisitions abroad than giving out dividends,” Hafizoglu said.

TeliaSonera and Altimo are battling Cukurova over control of Turkcell. The two companies sought to oust Turkcell Chairman Colin Williams, who replaced Cukurova Chairman Mehmet Emin Karamehmet last year, in a shareholders meeting April 21 because they said Williams lost impartiality by siding with Cukurova in board decisions.

Blocked Dividends

TeliaSonera, which blocked the approval of distribution of dividends in the April meeting, filed a court case to include board changes in the agenda of an extraordinary shareholders meeting due on Aug. 11.

“If Altimo raises its holdings to 27 percent in Turkcell, it may be positive in terms of ending shareholder disputes,” Hafizoglu said.

Cukurova signed a $3.3 billion agreement with Altimo in 2005 to finance the payment of its debt to the government because of its collapsed Pamukbank AS. Altimo bought 13.2 percent of Turkcell Iletisim for $1.6 billion from Cukurova and lent it another $1.7 billion with Cukurova pledging the remaining Cukurova Telecom Holding stake, an effective 13.7 percent in Turkcell Iletisim, as collateral for the loan.

“In 2007, following a number of defaults by Cukurova Group, Alfa appropriated the shares representing the Cukurova’s stake in Turkcell which Cukurova charged to Alfa as security for its outstanding loan of US$1.35 billion,” Altimo said in a statement yesterday. Cukurova had repaid $357 million of the $1.7 billion loan in 2006, it said.

Cukurova denied the default and said it was ready to repay the debt with a $1.5 billion loan from international markets.

“Cukurova has an automatic right to appeal the decision to the Privy Council in the United Kingdom,” Istanbul-based Cukurova said today. “It intends to do so and will file the necessary appeal papers as soon as practicable.”

Cukurova strongly disagrees with the decision of the Court of Appeal and is confident that the decision will be overturned at the Privy Council, it said.

To contact the reporter on this story: Ercan Ersoy in Istanbul at eersoy@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net.

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