Telia Sells $500 Million Turkcell Stake to Focus on Nordics

  • Swedish carrier had 38% holding in Turkey’s biggest carrier
  • CEO Dennelind says deadlock over Turkcell Holding remains

Telia AB sold about $500 million worth of stock in Turkcell Iletisim Hizmetleri AS, making progress on a vow to focus on its home region as it reduces its holding in an investment tied up in a decade-long ownership feud.

Stockholm-based Telia agreed to sell 155 million shares in Turkcell to institutional investors in an accelerated offering, the company said in a statement Thursday. The shares, representing a 7 percent stake in the carrier, were sold at 11.45 Turkish liras apiece, almost 7 percent lower than Wednesday’s closing price in Istanbul.

Telia is still Turkcell’s biggest shareholder with a combined 31 percent stake. However, much of it is tied up in a partnership that includes Russian businessman Mikhail Fridman’s LetterOne Holdings and Cukurova Holding AS, owned by Turkcell founder Mehmet Emin Karamehmet. The partners have been fighting a three-cornered battle for control of the company for years, most recently in an arbitration process that left a stalemate intact between Fridman and Karamehmet.

The feud has tied up money that Telia Chief Executive Officer Johan Dennelind would rather use to invest closer to home. Last month, Sweden’s former telecom monopoly completed an acquisition of Norwegian operator Phonero to strengthen its market position with corporate clients, and Telia continues to look for acquisition opportunities to expand its offering in Nordic and Baltic countries.

“Disciplined capital allocation is of utmost importance in managing Telia,” Dennelind said in the statement. “We are focused on ensuring that as much of our capital as possible works at the core of our strategy.”

Turkcell fell 6.7 percent to 11.46 liras at 11:28 a.m. in Istanbul, the steepest intraday decline since Feb. 22. Telia declined 0.1 percent to 36.59 kronor in Stockholm.

In December, Telia registered 287.6 million shares of its Turkcell stake for possible sale, in the first sign the Swedish carrier was preparing to exit part of its investment. Wednesday’s sale, which Telia said produced gross proceeds of $503 million, leaves the company with a 7 percent direct holding in Turkcell and marks an important step in Dennelind’s plan to concentrate investments to markets closer to home.

Board Spats

Spats over board representation, the size of dividends and other issues have hampered operations at Turkcell as each shareholder tried to outlast the other. Telia said it has no intention to sell its indirect interest in Turkcell, and Dennelind said he doesn’t expect that the deadlock will be easier to solve following the stake sale.

“We continue to work relentlessly to find solutions to our shareholding in Turkcell,” Dennelind said.

Since Dennelind announced plans to exit Asian markets that accounted for almost a third of the company’s earnings in September 2015, Telia has divested units in Nepal and Tajikistan, but has struggled to sell other Central Asian holdings amid a probe into alleged corruption in Uzbekistan.

The proceeds from the sale of the Turkcell shares will cushion Telia’s cash position as the company prepares to pay a fine of about $1 billion to U.S. and Dutch authorities to settle allegations that Telia paid bribes to win business in Uzbekistan. Last month, Dennelind said he’s close to reaching a deal with the authorities and that the likely settlement would be lower than the previous assumption of $1.45 billion.

BofA Merrill Lynch, Citi and UBS acted as joint bookrunners for Wednesday’s offering, Telia said.

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