By Emre Peker
ISTANBU--Turkey's markets regulator has appointed two board
members to Turkcell Iletisim Hizmetleri AS (TCELL.IS) to end a
gridlock at the country's biggest mobile phone operator that has
crippled decision-making and prevented the company from releasing
second quarter earnings amid a shareholder battle for control of
the firm.
The move by Ankara-based Capital Markets Board brings the number
of government-picked board members at Turkcell to five, with two
seats still empty. The watchdog said it has asked Turkcell's three
leading shareholders-Turkey's Cukurova Holding AS, Moscow-based
Alfa Group and TeliaSonera AB (TLSN.SK) of Sweden-to nominate two
people each for the remaining posts within 15 days. The company
needs board approval to file second quarter results, due by Aug.
26.
Turkcell's major owners have been locked in a legal tug of war
for six years over a stake that would determine whether Turkish
billionaire Mehmet Emin Karamehmet's Cukurova, Russian oligarch
Mikhail Fridman of Alfa, or the biggest Swedish phone company will
control the mobile operator. As the disputes dragged on, the
parties failed to pick new board members, prompting Turkey's
authorities to act.
The government fears the disagreements will bog down a company
it considers important to national interests. Analysts say Ankara
also doesn't want control of the Istanbul-based firm to shift out
of Turkish hands.
"We thoroughly regret that it has gone this far. This solution
suggests that the entire board should consist of independent
members...Our understanding is that this is a temporary and
emergency measure," said Salomon Bekele, a spokesman for
TeliaSonera, which has a 38% share in Turkcell. "Our hope is that
we as soon as possible will reach a solution whereby we as a
shareholder may influence the company in accordance with the size
our of holding."
Turkcell posted the regulatory decision verbatim in a regulatory
filing on Friday, and a spokesman declined to comment. Alfa's
telecom subsidiary Altimo, through which the Russian firm controls
its Turkcell stake, couldn't be reached for comment at its Istanbul
and Moscow offices.
Turkey's regulators first moved to end Turkcell's executive
quagmire in March, using their authority to appoint three
independent members to the seven-seat board. When the remaining
four members' three-year terms expired in late April, the Capital
Markets Board said it would appoint more members. Turkey enacted a
new law this month that expands the watchdog's ability to appoint
more board members.
Turkcell shares rallied 1.3% to 11.95 liras ($6.17) mid-day
Friday as the benchmark Borsa Istanbul 100 Index dropped 0.22%.
Analysts say the appointments may eventually pave the way for
dividends, which the company hasn't paid since 2010.
The company's shares have rallied previously on optimism that
ownership and boardroom struggles would be resolved, but the gains
proved premature as the court cases continue.
Most recently, a U.K. court granted Cukurova an extension to
repay $1.56 billion it owes to Alfa to redeem a 13.8% stake in a
holding company that would re-establish Mr. Karamehmet's control
over Turkcell. Cukurova lost control of the shares after pledging
them as collateral to Alfa for a loan and then defaulting on the
debt. The Privy Council in London ruled in January that Mr.
Karamehmet had a right to reclaim the shares upon payment.
Separately, a New York court ordered Cukurova to pay about $1
billion to TeliaSonera for breaking a deal to sell the same stake
it pledged to Alfa.
"The Capital Markets Board made its move to end the deadlock at
Turkcell, which is a big international firm that has been unable to
pay dividends or announce earnings because of shareholder
conflicts. In that sense, this is a positive step for dividends,"
said Tugce Karagul, an analyst at Tera Brokers in Istanbul. "I
don't think Cukurova will lose the controlling stake in Turkcell,
the Privy Council decisions have been supportive in that
sense."
Write to emre.peker@wsj.com and sven.grundberg@wsj.com
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