Turkey’s sovereign wealth fund, headed by Turkish President Recep Tayyip Erdoğan, has gained control of the administration and privileged shares of Turkey’s largest GSM operator, Turkcell, following an Oct. 21 vote by the telecommunications giant’s board of directors.
The Turkey Wealth Fund (TVF) agreed with Çukurova Holding, state-owned Ziraat Bank, Swedish telecom company Telia and Luxembourg-based LetterOne to acquire 26.2 percent of Turkcell and became the controlling shareholder of the company. In addition, the fund gained the right to appoint five out of nine board members for the company, due to its 15 percent privileged shares.
LetterOne’s stakes meanwhile have risen to 24.8 percent from 13.2 percent, while Telia is set to sell its 24.02 percent indirect stake to the TVF for $530 million. Çukurova Holding’s 13.8 percent indirect stake – given as collateral to Ziraat – will also be sold.
In short, Telia and Çukurova Holding, which are among the founding members and largest shareholders of Turkcell since it was established in 1994, area leaving the company after 26 years, their shares to the TVF. This has left the fund and LetterOne, an investment firm belonging to Russian oligarch Mikhail Fridman, who is known for his ties to Russian President Vladimir Putin, as the two main partners of Turkcell.
TVF general manager Zafer Sönmez announced that the fund has taken on the $1.6 billion debt owed by Çukurova Holding to Ziraat Bank, as part of the deal. Çukurova Holding had borrowed the loan from Ziraat Bank in 2015, using its Turkcell shares as financial assurance. When it fell behind on its payments, Ziraat’s general director and chairman of the bank’s managing board, Hüseyin Aydın, was appointed to Turkcell’s board of directors in March 2019, in exchange for the amount owed.
The move effectively publicised Turkcell, both Turkey’s first private GSM operator and first private company to be listed on the New York Stock Exchange (NYSE) in 2000.
Another Turkish telecom giant, Türk Telekom, which is an entirely public company, was privatised in 2005, a few years after Turkey’s ruling Justice and Development Party (AKP) came to power. Ojer Telecommunications (Otaş), a subsidiary of Oger Telecom owned by the Lebanese Hariri family, acquired a controlling 55 percent stake for $6.5 billion.
BOTAŞ, a state-run energy distributor, later defaulted on a multi-billion-dollar loan, signing over its shares and administration to three banks it owed money to, before pulling out of Turkey. In the end, the Hariri family attained $15 billion in profits in a period of 13 years, double the amount it allotted for privatisation fees.
The privileged shares of Türk Telekom, which belong to the Treasury, are also under the control of the Erdoğan-headed TVF. As such, the TVF is also a shareholder with Türk Telekom, in addition to having say over the company’s administration.
Two of the country’s largest GSM operators are under TVF control. The fund also includes 100 percent of the shares of the public company Türksat, Turkey’s sole satellite communications company.
Türk Telekom also includes under its auspices TTNet, the country’s largest internet infrastructure owner and service provider, digital platform TivBu and many other internet and technology firms. The TVF has effectively gained a strong arm in the decision making and authority in all these firms.
Turkish Vice President Fuat Oktay for years worked as the deputy chairman of Türk Telekom. And Erdoğan’s consultants, who are also former AKP lawmakers, served on the executive and auditory boards of the company, with generous salaries, for years.
Now that the TVF has gained controlling shares in Turkcell and its subsidiaries this month, the company will become a secondary, or in some cases tertiary, source of income for former AKP ministers, lawmakers, provincial heads and party members.
Turkcell is also expected to provide significant opportunities for the TVF by using its shares as financial assurance for borrowing in both domestic and foreign markets, and, at a later phase, the likely full control of Turkcell stakes will open the doors to billon-dollar block sales.
When it was listed on the NYSE in 2000, Turkcell’s market value was around $22-25 billion, but the company has suffered some serious losses since, including a monumental one in the 2001 banking crisis.
The company’s market value was estimated at around $4.7 billion, as of Oct. 23.
The now Erdoğan-controlled TVF is likely to use all of the telecom companies as resources for helping Turkey’s strongman and his ruling AKP win the next elections. The companies will also have the important task of advertising for government-controlled media and providing resources to pro-government outlets.
Sönmez, the fund’s managing director, has recently said that investors in Turkcell would gain long-term profit, as the company was seeking to reach $25 billion in value. But it does appear that small investors and those who purchased shares in the NYSE and Borsa Istanbul, the Turkish stock exchange, may have to wait a lifetime to see large profits and the envisaged value Turkcell is hoping to reach.