Shareholder revolt rocks Turkcell

MTN’s Turkish rival, Turkcell, which is suing the Johannesburg-based cellphone giant for $4.2-billion, is embroiled in a bitter internal battle as shareholders square up for control of the company. Turkcell, listed in New York and Istanbul, has a market capitalisation of $11-billion.

In court papers filed in the United States recently, Turkcell accused MTN of paying bribes, facilitating the purchase of arms and defence equipment and canvassing support at the United Nations Security Council in exchange for Turkcell’s 49% stake in Irancell. But inside Turkcell’s own walls, a story of corporate skullduggery and shareholder revolt is also playing out.

The company’s shareholders — TeliaSonera AB, Cukurova Group and Altimo — have been mired in wrangles for control. At the centre of the duel is Turkcell founder Mehmet Emin Karamehmet and Altimo, the Russian shareholder that indirectly owns 13.2% of the company.

Karamehmet founded Turkcell in February 1994 and is reportedly Turkey’s richest man, with an estimated wealth of $4-billion. He owns Cukurova Group, a Turkish conglomerate active in insurance, media, trade, industrial services, communications, information technology and tourism. Cukurova controls Turkcell through a complicated shareholding and voting structure, despite holding only 13.7%.

Karamehmet has been fighting off Altimo’s parent, Alfa, an investment vehicle of Russian billionaire Mikhail Fridman, and TeliaSonera, Sweden’s largest telephone company, since he sold an $11.5-billion stake to them in 2005. The rival parties have been debating whether this agreement is binding and legal appeals and counterappeals spanning continents have been muddying the waters.

Altimo’s lawyers are arguing that Karamehmet’s failure to repay a $1.6-billion loan it extended to him in 2005 gives them a claim to his 13.7% share in Turkcell, which was used as collateral for the loan.

Short reprieve
But Karamehmet won a reprieve recently in courts in the United Kingdom against a Caribbean court’s decision ordering him to deposit $1.45-billion as a guarantee for his stake in Turkcell. In the next two months the UK’s Privy Council will hold a special hearing on the matter and the final hearing is scheduled for late October or early November.

This week Turkcell freed $249.4-million worth of assets in the company belonging to Cukurova Holding after Karamehmet made an unspecified payment towards the large debt mountain, according to a Reuters report. Turkcell initially seized the assets in May 2011.

The fight has created uncertainty in the company at a time when it needs to concentrate on winning its case against MTN and insiders say it is affecting its performance. The messy legal battle has prevented Turkcell from approving its financial statements or paying a dividend.

Turkcell’s reputation is also threatened by because of Karamehmet’s alleged “shady” dealings. In January 2005 a US embassy cable, which was released by WikiLeaks, warned US businesses not to do business with Karamehmet.

In 2012 he was forced to relinquish his chairmanship after he was sentenced to 12 years in prison for fraud relating to commercial lender Pamukbank, which is owned by Cukurova and collapsed during Turkey’s financial crisis in 2001.

Karamehmet chaired Pamukbank until its demise and was found guilty of taking out loans totalling about $100-million with no intention of repaying them.

Avoids the slammer
He did not serve the jail sentence, but was unable to leave Turkey pending his appeal. In June 2011 a higher court ordered that the original decision be overturned and the case be reconsidered.

His reputation was further damaged in Turkey when he won bids for electricity distribution networks of $6-billion in May 2011, but did not secure financing and did not pay for the licence.

Now, Colin Williams, the man regarded as Karamehmet’s ally and who succeeded him as Turkcell chairperson in February 2010, is under attack from the Russian and Swedish shareholders. Last year Altimo and TeliaSonera tried to oust Williams at a special annual general meeting.

Bloomberg reported that Williams opened a court case to cancel a decision by shareholders at a meeting last October not to approve the company’s 2010 financials.

The Russian and Swedish shareholders had blocked the approval of the income statement because of a battle for control of the company with Cukurova. They claim that Williams, who is backed by Cukurova, has hampered Turkcell’s growth — claims Williams has denied.

TeliaSonera launched legal action against Williams last year and has called for him to be replaced with an independent board member in a bid to resolve the deadlock.

Turkcell had not responded to questions at the time of going to press.

Dragged down by disputes
Turkcell has been plagued by a long line of litigation:

  • In January 2004, a Turkcell director, Ersin Pamuksuzer, and a Turkcell lawyer were arrested as part of an investigation into allegations of judicial corruption. At the time, a Turkcell spokesperson said the arrest had nothing to do with the company;
  • In June 2005, TeliaSonera, Turkcell’s Swedish shareholder, announced it was suing the Cukurova Group over its refusal to honour an agreement to sell its 27% stake in Turkcell. TeliaSonera was willing to pay $3.1-billion to increase its holding from 38% to 64.3%;
  • In April 2009, Turk Telekom filed a lawsuit against Turkcell claiming the company was imposing higher fees on Turk Telekom’s customers than it did on its own subscribers;
  • In December 2009, the Turkish competition authority fined Turkcell $23.9-million for breaching competition rules by abusing its dominant position in the market;
  • In September 2010, the Turkish finance ministry fined Turkcell $190.9-million — one of the biggest such punishments for alleged tax fraud;
  • In March 2011, TeliaSonera announced that it was suing Turkcell chairperson Colin Williams for blocking its proposal to increase the number of members on the mobile company’s board; and
  • In August 2011, the Turkish competition authority fined Turkcell $58.4-million for breaching competition regulations regarding distribution.

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Related stories


Subscribers only

ANC’s rotten apples on the chopping block

Now that the NEC has finalised its step-aside guidelines for those facing corruption charges, a swathe of officials will struggle to cling to their positions

The race elephant lurking in the DA’s ‘laboratory’

Tony Leon’s comments calling Mmusi Maimane an ‘experiment’ have lifted the lid on what disgruntled black leaders describe as insidious racism and a refusal to hold racists to account

More top stories

Analysts expecting another attack ‘in the next few months’ in...

The extremist insurgency in Mozambique has been an ongoing threat since 2017. SADC needs to act now, say analysts

SIU probes how master of the high court fleeces the...

While the SIU delves into dozens of allegations of fraud, corruption and misconduct against officials at the master of the high court, many families have been left destitute after the death of their loved ones.

New cyber scam targets property sales

Suspects appear in court on charges of fraud and forgery to intercept payments for title deed transfers and associated legal fees

Barred neonatal visits hurt infants

Some nurses chose to ignore the no-visit rule, and now the health department has allowed mothers to feed their premature infants

press releases

Loading latest Press Releases…