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Turkcell Gets $3B Loan, Goes Shopping

Light Reading
News Analysis
Light Reading
2/27/2007

Turkish mobile operator Turkcell Iletisim Hizmetleri A.S. (NYSE: TKC) has closed on a $3 billion loan that it says will be used to make investments and acquisitions abroad in the next six months. (See Turkcell Secures $3B Loan.)

Turkcell, which holds a 61 percent share of the domestic market, is looking at expanding its holdings in neighboring countries in Eastern Europe, Central Asia, and the Middle East where telephone penetration is low.

The carrier already holds interests in GSM operators in Azerbaijan, Georgia, Kazakhstan, Moldova, Northern Cyprus, and Ukraine. In a December presentation to analysts, Turkcell said it would inject more cash into the Ukrainian business -- in which it holds a majority stake.

The unsecured loan, which was arranged by a group of six banks, has a tenure of six months and will be used for general corporate purposes by Turkcell and its subsidiaries as well as international expansion. According to local press reports, CEO Süreyya Ciliv indicated at a signing ceremony that the company could also use its own equities to finance investments, adding, "we have many opportunities right now."

One of its potential investments is the third mobile license up for grabs in Saudi Arabia. Turkcell has partnered with Kingdom Holding Co., owned by Saudi Prince Alwaleed bin Talal, to put in a bid for the license. It's up against eight other consortia, which include the likes of Orascom Telecom , Mobile Telephone Networks (MTN) , Bharti Airtel Ltd. (Mumbai: BHARTIARTL), and Reliance Communications Ltd. (RCom) The deadline for bids closed on February 24, and the applications are now being examined by the regulator. (See Nine Bid for Saudi License.)

Saudi Arabia is seen as the most lucrative telecom market in the Middle East thanks to rapid subscriber growth and high average revenue per user (ARPU). Ovum Ltd. predicts its mobile sector will see a compound annual growth rate of 21 percent between 2005 and 2010 -- one of the highest in the world. Analysts have suggested the mobile license could go for as much as $4 billion.

Turkcell had also expressed interest in acquiring Greek mobile operator ‘IM Hellas Telecommunications S.A. , but it was outbid by Weather Investments (the holding company of Egypt's Orascom), which snapped up the carrier for €3.4 billion earlier this month. (See Turkcell Eyes TIM Hellas and Weather Buys TIM Hellas.)

At home, the Turkish government has recently agreed to offer four 3G licenses that will go up for auction within the next six months. Turkcell reckons it's well positioned for the rollout of 3G, which it says will require "moderate investment."

Turkcell is still caught up in a legal tussle between Russia's Alfa Group , Turkey's «ukurova Group , and Telia Company over its ownership. Çukurova agreed to sell a 27 percent stake in Turkcell to TeliaSonera, giving it majority control, but later backtracked on that agreement by signing a loan package deal with Alfa that would have transferred the Turkcell stake to the Russian company. (See TeliaSonera Sues Alfa and TeliaSonera Wins Ruling.)

Turkcell, the only Turkish company listed on the New York Stock Exchange, is set to report its fourth-quarter earnings after the market closes today.

— Nicole Willing, Reporter, Light Reading

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