Turkcell Feuding Shareholders Fail to Approve 2015 Dividend

Updated on
  • Company's stock reverses gain to sink as much as 1.9 percent
  • Investors fail to agree on plans at annual meeting on Tuesday

Turkey’s biggest mobile phone operator won’t distribute a dividend from its 2015 profit, after the company’s feuding shareholders couldn’t agree on whether to support the plan at the annual meeting in Istanbul.

Shareholders of Turkcell Iletisim Hizmetleri AS also failed to agree on a stock buyback plan, according to a statement Tuesday to the bourse. The company had proposed to pay out a gross dividend of 1.2 billion liras ($418 million), or 0.54545 lira per share, the Istanbul-based company said on March 23.

Tuesday’s decision reinstates a stalemate over the dividend that was temporarily overcome a year ago, when the company made payouts from profits earned in 2010 through 2014.

Two of Turkcell’s three largest shareholders, Alfa Telecom Ltd. and Turkey’s Cukurova Holding AS, have feuded for a decade and are dueling over ownership. Their Turkcell Iletisim stakes are owned through two partnerships, with Cukurova having a majority in the one that owns 51 percent. A lender, Ziraat Bankasi, has also been dragged into the talks.

“It is likely that Alfa’s rejection might have blocked the dividends and share buyback as Cukurova is in need of cash for repayment of their $1.6 billion debt to Ziraat Bankasi,” said Alper Ozdemir, an analyst at Istanbul-based Oyak Securities, in an e-mailed note. “A possible stake sale by Alfa Telecom to Cukurova or Ziraat Bank should be followed in the following days that would end this long lasting deadlock among shareholders.”

Overall, Alfa has a 13.2 percent stake in Turkcell, while Cukurova has 13.8 percent. TeliaSonera AB, which owns 38 percent of Turkcell, supported the dividend and buyback proposals, according to Henrik Westman, a spokesman for the Swedish telecommunications company.

The decade-old dispute among Turkcell’s shareholders has prevented agreement on other corporate matters as well. Alfa, owned by Russian billionaire Mikhail Fridman’s investment vehicle LetterOne, bid last year to buy out Cukurova’s Turkcell stake for $2.8 billion. It also offered to sell its stake to Cukurova for $2.7 billion last week.

Turkcell Holding, which owns 51 percent of Turkcell Iletisim, is 53 percent owned by Cukurova Telecom Holdings, with TeliaSonera holding the remainder. Alfa Telecom Turkey Ltd. owns 49 percent of Cukurova Telecom Holdings and Cukurova Holding controls 51 percent.

Cukurova borrowed from Ziraat in 2014 to recover its stake in Turkcell from a loan-for-shares deal with Fridman’s Alfa from 2005. The two partners have a case pending at a London arbitration court over a dispute regarding buying out one another’s stake in the mobile operator.

Turkcell shares fell 1.6 percent to 11.50 liras in Istanbul, after dropping as much as 1.9 percent. The shares have gained 16 percent so far this year.