Russian, Swedish firms in court tangle over control of Turkcell

STOCKHOLM – Nordic telecoms firm TeliaSonera announced yesterday it had started new legal proceedings in its battle with Russia’s Alfa group for control of Turkish mobile operator Turkcell. Telia said it had filed a case at the International Court of Arbitration in Vienna claiming a breach of a shareholders’ agreement between TeliaSonera and Turkish firm Cukurova giving it first refusal over a stake in Turkcell now being reeled in by Alfa. «The latest developments clearly show that the intention has been to immediately sell indirect shareholding interests in Turkcell Holding without respecting TeliaSonera’s rights,» TeliaSonera Chief Executive Anders Igel told a news conference. Finnish-Swedish TeliaSonera, which owns 37 percent of Turkcell, thought it had wrapped up a deal in March to purchase another 27 percent in the operator from Cukurova. However, Cukurova failed to meet a May deadline to sign off on the deal. Debt-laden Cukurova abandoned the agreement after securing a $3.3 billion refinancing deal with Alfa Group, which is owned by tycoon Mikhail Fridman and is known for aggressive tactics, in return for a possible 13.22 percent stake in Turkcell. The financing deal includes a $1.707 billion loan and $1.593 billion in convertible bonds. If Alfa converts the bonds into shares it will own 49 percent of Cukurova Telecom Holding Limited which in turn will own 52.91 percent of Turkcell Holding after a separate deal involving the sale of bank Yapi Kredi to a Turkish-Italian venture. Turkcell Holding owns 51 percent in Turkcell. Telia put on hold The arrangement aims at helping Cukurova circumvent Telia’s right of refusal on any change in Turkcell’s share structure. «With a string of financial deals they are trying to bypass the agreement which gives us right to first refusal,» TeliaSonera spokesman Michael Kongstad said. Telia has already started arbitration proceedings in Geneva, claiming Cukurova breached an agreement to sell it the shares in question and pressuring the Turkish firm to finalize the deal. It has also asked a Turkish court to stop Cukurova doing transactions involving Turkcell, Turkey’s leading mobile phone operator, until the arbitration process is finalized. The Swedish government has weighed in, ahead of EU accession talks with Turkey planned for later this year, saying the issue was «a test of the Turkish economy and institutions.» Who’s in charge? But several hazy issues surround the future of Turkcell, the only Turkish firm listed on the New York Stock Exchange, which TeliaSonera had hoped would be a vehicle for further expansion out of its mature and competitive Nordic home markets. «If the transaction between Alfa and Cukurova is approved, who will have control of Turkcell?» said Telia’s Igel. TeliaSonera said information from its rivals revealed plans to grant Alfa two places on the seven-member boards of Turkcell and Turkcell Holding, which would «result in a change in the control of Turkcell by giving Alfa a joint control position,» TeliaSonera’s General Counsel Jan Henrik Ahrnell said. TeliaSonera holds three places on the Turkcell Holding board and two places on the board of the mobile operator itself. Turkish courts would also need to uphold and enforce the outcome of the arbitration in Geneva and Vienna, something TeliaSonera said it expected them to do. TeliaSonera said it was difficult to estimate how long the arbitration processes might take, but nine to 18 months was the norm, making any conclusion of the legal battle this year unlikely. TeliaSonera said Turkcell, whose consolidated net profits fell to 135.75 million new lira ($100.6 million) in the first quarter, had so far been unscathed from the selloff row. «I think life will go on at Turkcell and so far this discussion about possible ownership changes has not had any impact on Turkcell as far as we can see,» Igel said.

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