Turkey's troubled telecoms privatisation took what appeared to be one step forwards and one step back this week, as a delay in the tendering process was balanced by some more positive news on the size of the stake on offer.
The block sale of Turk Telekom (TT) has been long awaited by the market, particularly as it has become a major requirement for the government in its efforts to meet targets for reform set by the IMF. Yet, despite repeated attempts over the years to sell the giant company off, it steadfastly remains on the government's books.
Meanwhile, the telecoms market has moved on, both globally and inside Turkey. What the government was able to claim as worth $30bn in 1999, many market analysts now value at between $2bn and $5bn. So, when TT chief Erkan Akdemir said on March 15 that, "We have received information that the tender... has been delayed past May 31," it seemed things were not about to get any better.
The May 31 deadline had been earlier claimed as the day by which the TT tender announcement would be made.
However, to some relief, this statement was contradicted two days later by Transport Minister Binali Yildirim, who said the government was still targeting the end of May for the announcement.
The minister said that the earlier confusion had arisen because the government had been forced to annul its previous choice of consultancy for the tendering process. This had happened in turn because of the requirements of the new public procurement law. Previously, the selection of a consultancy for the privatisation was to be done via a process of bargaining, rather than by the "sealed envelope" method generally thought to be less easy to bias.
The change of method meant a return to square one on the selection process, creating fears of a possible failure to meet the May 31 deadline. Yildirim thus moved to assure the market that these fears were groundless, and the government was still aiming for the original target.
Meanwhile, another aspect of Akdemir's statement on the sell off was receiving some positive attention. The TT chief had also said that the sale of a 51% stake had been agreed. This was highly significant, as previously, there had been a ban on foreign interests bidding for more than 45% of the company.
The rationale for this limit was security. The powerful Turkish military had expressed strong concerns over the possibility that what it saw as a vital national strategic interest might end up in foreign hands. This fear was added to by the fact that the military also uses the TT network, unlike the armed forces of many other countries, which operate their own, parallel communications networks.
This concern does seem now to have been overcome though. This is also good news for the bidding in general, as the fact that a controlling stake was unavailable previously had put off many foreign investors. A lack of suitable bids had often been one of the reasons for the cancellation of the TT sell off in the past.
Now, the market is buzzing with speculation over just who might be in the bidding. At present, the only true certainty seems to be that Turkey's own giant conglomerates, Koc and Sabanci, will be making an offer, via a joint venture they have established and which is to be advised by Goldman Sachs.
Elsewhere, Anadolu Group has expressed an interest, while foreign players include Italian corporation Pirelli. Subjects of speculation are Telecom Italia, Singapore Telecom and Advent.
However, the bidders in general are thought more likely to come from the financial sector than to be existing telecoms companies, given the state of most of the latters' finances and the generally depressed state of the telecoms market.
Whoever puts in an offer though, many market watchers are complaining that it is hard to calculate what a reasonable bid would be. There appear to be few valuations around based on any in-depth research. The value of the company resides primarily in its infrastructure - it is effectively the nation's fixed-line monopoly, although legally speaking the fixed-line market is now open to competition. Yet the state of this infrastructure, and its long-term usefulness in a market known for rapid technological advances, is questionable.
TT also holds part of a GSM company, with Turkey's fourth mobile license having been initially granted to it as a sweetener ahead of privatisation. However, this company, Aycell, failed to make any significant impact in a GSM market dominated by Turkcell and Telsim. Recently merged with the country's third-smallest network, the Telecom Italia-Is Bank owned Aria, the resultant company will have an uphill struggle to establish itself.
Whatever the case, an early sale is what almost everyone in the market is looking for. The government is widely seen as more committed to privatisation than any previous one, so perhaps TT's call is finally about to be put through. Don't hang up.