The dispute of 3 brothers

I have been writing about the dispute of Turkcell’s shareholders in Turkey for years. It seems that the time for a once-and-for-all solution is near. That’s why it was a good time to speak to Altimo’s vice president Evgeny Dumalkin about the problems at Turkcell.

You can read the highlights of our interview below.

Our first task is to improve the corporate governance of Turkcell. It needs a strong board of directors and the chairman of it should be a heavyweight telecom expert with international experience. Altimo is keen to invest further in Turkcell keeping it the Turkish national and regional champion in the telecom and technology sector. Our main investment target: the prosperity and value growth of Turkcell. Prosperity will come from the commercial success of Turkcell in Turkey and in other markets. International expansion of Turkcell will also improve Turkey’s position as a regional power.

Having a huge cash pile ($3 billion) Turkcell has to optimize its capital structure. Being an excellent platform for expansion, Turkcell can invest free cash in many merger and acquisition opportunities. With the wide presence of a Turkish company abroad, Turkish economic and geopolitical influence will grow.

Turkcell currently faces a number of important business issues and its competitors are growing more strongly. While the current management team has performed reasonably well over the past few years, rebuilding Turkcell’s sales and distribution in Turkey, maintaining the strength of Turkcell’s brand in Turkey, there are a number of essential challenges that have to be addressed:

After a prolonged period of expansion the mobile voice market in Turkey has reached saturation, with the total number of subscribers not growing and even showing signs of decline. The combination of saturation, the introduction of mobile number portability and of various regulatory initiatives, the Turkish mobile voice market now is (a) fiercely competitive and (b) does not provide the previous growth opportunities in terms of revenues, profits, and, consequently, taxes.

International investment made by Turkcell in the past in Ukraine and, increasingly, Belarus has become more important for the consolidated financial results of Turkcell, and the performance in these markets is both increasingly important and creates issues and challenges in managing them;

We believe that Turkcell should focus on the following issues: (a) to make sure the core mobile voice product in Turkey is profitable and sustainable in the long term; (b) to explore new growth opportunities in Turkey, such as broadband; (c) to make sure international subsidiaries are performing well and add value to Turkcell; and (d) to invest profitably in the region.

Turkcell should work with the government to discuss the ease of the tax and regulatory environment as Turkcell is the most heavily burdened operator in regulatory terms, which significantly harms Turkcell growth and makes competition unfair.

I will analyze the interview in my next column.