Cukurova reclaims Turkcell controlling stake

A seven-year fight between a Russian oligarch and one of Turkey's most famous businessmen came to an end on Thursday, when Cukurova, a Turkish conglomerate, reclaimed the controlling stake in Turkcell, the country's biggest mobile company, from Russia's Alfa.

The $1.6bn transaction marks a victory for Mehmet Emin Karamehmet, who heads Cukurova, in his prolonged dispute with Alfa's Mikhail Fridman.

But the shares at issue could yet end up in the hands of the Turkish state, with the government of Recep Tayyip Erdogan, prime minister, reluctant to yield up to a foreign group. The Turkish state has already established a measure of de facto control over Turkcell.

After talks between Cukurova and Yildiz Holding, a Turkish conglomerate close to the government, proved abortive, financing for Cukurova's redemption of the shares from Alfa was provided by Ziraat Bank, which is wholly owned by the Turkish state.

In a statement to the Borsa Istanbul stock exchange on Thursday, Cukurova said it had reached a loan agreement with Ziraat Bank and had subsequently transferred $1.6bn to Alfa. This settles a debt to the Russian group for which the Turkcell stake had served as collateral.

The statement also noted that the shares now served as security for Ziraat Bank.

Thursday's transaction came after the UK Privy Council, the court with jurisdiction over the Turkcell-Alfa dispute, had ruled last year that Cukurova should have the opportunity to redeem the shares. The court then repeatedly extended the deadline for Cukurova to do so, partly because of its difficulty in obtaining financing due to legal action in the US by Alfa and its ally TeliaSonera, the Nordic telecoms group.

After Alfa and Cukurova came to an agreement last week on terms that would permit the share redemption, Alfa identified Ziraat Bank as the most likely source of financing for the transaction.

Some people close to the companies involved suggest that the resolution of the dispute also follows contacts between Mr Erdogan and Vladimir Putin, Russia's president, on control of Turkcell.

The mobile group's fate is highly political in Turkey. Directors nominated by the Capital Markets Board - including two former ruling party ministers and a party official - effectively took control of the board last year.

The telecoms sector has become more important than ever to the government. The past 12 months have featured widespread phone tapping, including illegal taps of many of Mr Erdogan's own mobile phone calls, abortive government efforts to ban access to Twitter and YouTube and a new internet law that broadens surveillance of web traffic.

In a further sign of government interest in the sector, Yigit Bulut, a prime ministerial aide, was named to the board of Turk Telekom, Turkey's other big telecoms group, in May. He is renowned for having blamed Lufthansa for anti-government protests, and for claiming that Mr Erdogan's foes were trying to kill him with telekinetic powers.

Ziraat Bank's readiness to provide funding for Cukurova - and so lay potential claim to the Turkcell shares - contrasts with actions by another Turkish state body, which has seized control of many parts of Mr Karamehmet's empire. Last year, Turkey's Savings Deposit Insurance Fund, an agency that seizes assets in lieu of debts, often to then sell them on to government allies, stepped in to take control of some of Cukurova's other holdings. These included Aksam, a newspaper that subsequently became pro-government, and a 53 per cent stake in Digiturk, a pay television group, for which Qatar's Al Jazeera is seen as the favoured potential bidder.

Cukurova did not respond to a request for comment, while Ziraat Bank declined to comment. In a brief statement, Alfa, which remains a Turkcell shareholder, confirmed the redemption took place according to the terms set out by the Privy Council.

© The Financial Times Limited 2014. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation