Turkey’s Cukurova Holding AS is close to recovering its indirect 13.8% beneficial, and also effectively controlling ownership stake in Turkish mobile phone company Turkcell, after a British court was told on July 25 that Cukurova agreed to turn over $1.6 billion, including interest, to repay a loan.
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Cukurova’s shares in Turkcell were seized in 2007, when it defaulted on a $1.35 billion loan from Altimo, part of the Russian Alfa Group.
In many parts of the world, particularly in developing countries where telecoms competition has not yet become a significant price-reducing force, holding a local mobile phone franchise is a license to make a lot of money.
In Turkey, the local mobile phone company Turkcell has been a very good business, but it’s been held by what ultimately proved to be a spectacularly unstable partnership between two large international investors—are the privately held international telecoms company Altimo, which is part of the Russian Alfa Group, and TeliaSonera a major publicly listed Swedish telecoms group—and Mehmet Emin Karamehmet, a local entrepreneur who controls the Turkish domestic industrial holding company Cukurova.
Alfa Group, the investment arm of Russian billionaires Mikhail Friedman and German Khan, through Altimo, has been squabbling for seven years among all the Turkcell partners, leading to something of a paralysis in business decision making, and also a block on dividend payments.
Earlier this year, an English court set July 30 as the deadline for Cukurova to pay back the $1.6 billion, including interest, which it had set in July 2013 as the requirement for restoration of Cukurova’s shareholding in Turkcell.
Given the complex holding structure behind the Turkcell investments, this holding will also confer effective control back to Cukurova, once the payment is made.
Alfa Telecom Turkey Limited originally loaned $1.352 billion to Cukurova Finance International Limited (CFI). The loan was secured by CFI’s 51% shareholding in Cukurova Telecom Holdings Limited and by Cukurova Holding AS’s 100% shareholding in CFI. These shares provided effective control of Turkcell, Turkey’s largest mobile telephone company and were seized by Altimo when Cukurova had defaulted in 2007.
According to Reuters, Cukurova is obtaining the $1.6 billion it needs to redeem the shares from the Turkish state-owned Ziraat Bank, and will meet the July 30 deadline.
It was the British Privy Council, acting as a court, which ruled in July 2013 that Cukurova must pay the $1.6 billion to Altimo in order to get back its shares. The Brits got involved as Cukurova, though based in Turkey, is formally registered in the British Virgin Islands.
In the glory days of the British Empire, the Judicial Committee of the Privy Council acted as a supreme court of appeal for the entire external empire, and today still hears appeals from Commonwealth member states, Crown dependencies and the remaining British Overseas Territories.
Altimo was created in 2005 by Alfa Telecom, which itself was established in 2004 to hold the telecoms investments of the Alfa Group Consortium. Altimo’s companies, including Vimpel.com and Turkcell, serve more than 280 million phone and broadband subscribers in Russia, Italy, Canada, Turkey and other global markets.
Mikhail Fridman, 50, is an active supporter of Jewish causes in Russia and Europe. In 1996 he was one of the founders of the Russian Jewish Congress (RJC), and today sits on its governing board. He has made large contributions to the European Jewish Fund, a non-profit organization aimed at developing European Jewry and promoting tolerance and reconciliation on the continent.
German Khan, 52, has also been an active supporter of Jewish causes, including making large contributions to the work of the European Jewish Fund. He is also a leading member of the Russian Jewish Congress.