Turk Telekom shares due to list on May 15 despite media’s criticism of a cheap sell-off

ISTANBUL – An initial public offering worth up to 2.8 billion lira ($2.2 billion) for fixed-line operator Turk Telekom is due to hit the Istanbul market on May 15, Turkey’s Privatization Administration said yesterday. Turk Telekom, a former fixed-line monopoly whose business now includes Turkey’s third-largest mobile operator, was partly privatized in 2005 when Dubai-based Oger Telecom bought a 55 percent stake. In a second phase, Ankara is listing up to 17.25 percent, including an over-allotment option. The government is pushing ahead with the deal despite a 22 percent decline on the Istanbul stock market this year, which has prompted several companies to postpone offerings, and analysts say the deal is being priced at a hefty discount. An initial price range of 3.9-4.7 lira gives the operator a market value of up to 16.45 billion lira ($12.85 billion), compared with the $11.9 billion at which it was valued by the 2005 sale. Turkish media have criticized the price range as selling off state goods too cheaply. Privatization Administration Chairman Metin Kilci declined to comment on the valuation at a news conference yesterday, but said it should not be compared with the 2005 sale, which entailed a control premium. «No one should expect me to comment on whether the price is low or high,» he said, adding that the government had yet to set out its plan for the remaining stake of around 30 percent. At the top of the range, Turk Telekom would be valued at a price to earnings ratio of 6.6 times last year’s profit. According to data from Oyak Securities, the some 50 Istanbul companies which it covers, excluding holding companies, trade at an average 10 times last year’s earnings, and mobile operator Turkcell at 13.2 times. Before Saudi Telecom Co bought a stake in Oger Telecom this year, advisers gave an implied valuation of around $20 billion for Turk Telekom, a source close to that deal said. The deal will raise a maximum 2.84 billion lira, well below the 3.9 billion which the government budgeted for last year. «Times are tough, so giving some additional discount is probably the right thing to do,» said one Istanbul equity analyst, who declined to be named. «If they had passed up on this it would have had a negative impact on other privatizations. It would have meant the government was not doing what the market was asking for.» Ankara is planning other privatizations for this year and on Friday announced a deadline for a long-delayed sale of two electricity grids. Turkey, a fast-growing European Union candidate, has attracted record foreign direct investment (FDI) in recent years, which it needs to offset a gaping current account deficit. But amid shrinking global liquidity, this year’s official FDI target of $18.5 billion – already below last year’s $22 billion – may not be reached, Treasury Undersecretary Ibrahim Canakci said this month. Preliminary bookbuilding for the Turk Telekom IPO is being carried out between yesterday and tomorrow, with final book building scheduled for May 7 to May 9.

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