Altimo, the indirect owner of 13.2 percent of Turkcell Iletisim Hizmetleri AS (TCELL), Turkey’s biggest mobile-phone operator, said it may seize another 13.7 percent if Cukurova Holding AS fails to pay $1.45 billion in debt by early March.
The potential seizure is based on a decision in September by the Eastern Caribbean Court of Appeal, said Mustafa Kiral, vice president for mergers and acquisitions at Altimo, the telecommunications investment firm controlled by Russian billionaire Mikhail Fridman’s Alfa Group. According to Istanbul- based Cukurova, the court order doesn’t allow Altimo to take the shares in dispute.
Cukurova Holding, owned by Chairman Mehmet Emin Karamehmet, controls Turkcell Iletisim through a complex structure. Alfa and TeliaSonera AB (TLSN), Sweden’s largest telephone company, are fighting Cukurova for control of the Turkish mobile operator.
Cukurova signed a $3.3 billion agreement with Altimo in 2005 to finance payment of debt owed to the Turkish government because of its collapsed Pamukbank AS. Altimo bought an indirect 13.2 percent of Turkcell Iletisim for $1.6 billion from Cukurova and lent it $1.7 billion after Cukurova pledged 13.7 percent of Turkcell as collateral. Cukurova repaid $350 million and Altimo later said Cukurova defaulted on repayments of the rest, while Cukurova said Altimo didn’t take installments after it borrowed $1.5 billion from international markets.
“According to the court decision, Cukurova must pay $1.45 billion to the court or may face the seizure of the Turkcell stake to Altimo,” Kiral said in an interview. The figure includes principal and interest, and the ruling is on appeal to the Privy Council in London.
Cukurova expects to pay the money owed and believes that Moscow-based Altimo can’t seize shares in the meantime, according to a Cukurova executive who declined to be identified.
“Cukurova was concerned to ensure that, during the appeal process, and while ownership of the Turkcell shares is yet to be finally determined, Alfa could not take any steps which would have a potentially damaging or irreversible effect on those shares,” the executive said in a statement today.
“What the Court of Appeal’s order does not do is to say that if Cukurova does not make the payment into court, its main appeal to the Privy Council falls away and Alfa takes ownership of the shares in dispute,” he said. “Compliance or otherwise with the condition to make payment into court does not affect Cukurova’s main appeal to the Privy Council, which will continue regardless.”
Turkcell Holding, which owns 51 percent of Turkcell Iletisim, is 53 percent owned by Cukurova Telecom Holding, with TeliaSonera holding the remainder. Altimo’s parent Alfa Telecom Turkey Ltd. owns 49 percent of Cukurova Telecom Holding and Cukurova Holding controls 51 percent, which is the stake Altimo may potentially seize, Kiral said.
Turkcell shares rose 1.4 percent to 9.90 liras at 4:46 p.m. in Istanbul trade, the highest level almost in a year.
Independent Board Members
Altimo is also seeking to increase the number of members on the Turkcell board to 10 from seven with the addition of three or four independent members, in line with the market regulator’s decision, Kiral said. The capital market board required all listed Turkish companies to have independent board members, proportional to their free float, in December. The candidates must be approved by the regulator.
“We want Turkcell to make decisions on expansion outside Turkey,” he said. “With the current management structure, it can’t do that. Turkcell can grow in the Middle Eastern and African markets.”
Altimo wants to remain as a minority shareholder in Turkcell, Kiral said.
Investors TeliaSonera and Altimo blocked a decision on dividend payments in a series of shareholders’ meetings in 2011, after failing to oust Chairman Colin Williams from the board. They claimed he hampered Turkcell’s growth by favoring Karamehmet. Williams denied the allegations.
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