As last Friday's deadline for bids in the sale of state telecoms giant Turk Telekom passed, just four consortiums remained in the race. Yet with the nature of their bids not due to be revealed before July 1, speculation remains high as to where this troubled sell off will go next.
The tender is for a 55% stake in Turk Telekom (TT), which is one of Turkey's largest companies and one of the government's most valuable assets. Long considered the jewel in the crown of the country's privatisation programme, much of the current government's sell-off hopes depend on a successful outcome here.
This is particularly so given the series of disappointing results recently in other sell offs, such as the tobacco arm of TEKEL, which back in April received no bids. Meanwhile, the sale of state refiners TUPRAS has also been dogged with problems. Previous efforts to sell TT have also been cancelled due to low bids, with the whole sell-off process now stretching back into the 1990s.
On June 24, however, bids for TT were submitted to the Privatisation Administration (OIB) by four parties. These were a partnership between Turkey's Koc Holding and TC Group LLC, a division of the US-based Carlyle Group; the Oger Telecom consortium, an offshoot of the Saudi Oger group owned by the family of assassinated Lebanese former prime minister Rafik Hariri; a joint venture between the United Arab Emirates' Etisalat and Turkey's Cetel-Calik; and a consortium of four companies led by Turktell, an offshoot of Turkcell, the country's leading GSM operator. The other companies in this consortium are Genpa Telekomunikasyon, which has a 30.01% stake, Tekofaks, with 20%, and Kurtson, with 9.99%. Turktell has the remaining 40%.
Saudi Oger has formed a consortium with Telecom Italia SpA (TI) for the bid, with the resulting consortium organised to give Oger Telecom the consortium leader position, while TI joins as a potential minority partner.
Oger Telecom also has a partnership with BT Group PLC's (BT) international consulting arm, BT Telconsult, on operational and technical matters. A management agreement has been signed with BT Telconsult that will allow both companies to further their operational and technical co-operation if the consortium's bid for the TT stake succeeds. If it does, Oger and BT Telconsult will likely manage the fixed-line business, while Oger Telecom and TI will focus on the management of the mobile business, Dow Jones reported just before the bids were in.
It is this mobile business that has in the past attracted much investor interest in TT. Originally, when TT was first slated for sell off back in the 1990s - and during the telecoms boom - the successful buyer of the company would have received the country's fourth GSM licence along with the fixed-line network.
Yet since then, much has gone wrong. The fourth licence was activated and launched as Aycell, yet this failed to cut much of a market share away from the country's two leaders - Turkcell and Telsim. Meanwhile too, Turkey's third GSM license was sold off to a partnership between TI and Turkey's Is Bank for some $2.5bn.
This third company, Aria, also failed to grab a major market share - by 2003 it had around 1.5m subscribers out of a total of 26m - and was also becoming increasingly annoyed with what TI saw as unfair competition and high interconnection rates. Intervention by the Italian prime minister, Silvio Berlusconi, led to a deal being struck in which Aria was merged with Aycell to form a new company, Avea. This gave the new company around 2.5m subscribers. The company's ownership structure was set at 40% TI, 40% TT and 20% Is Bank.
Yet this also meant that the TT tender lost a lot of its glitter. Now, whoever wins the bidding will get just 40% of Avea.
Given that this would not be a controlling interest, TT begins to look more unpalatable. The new owner too would likely be faced with a highly difficult political task when it comes to restructuring TT's working practices and workforce, which is widely seen as too large by outside observers. TT employees have already staged a series of demonstrations against the privatisation in Istanbul, Ankara and Sanliurfa. At the same time, TT no longer enjoys a fixed-line monopoly, as it did when it was first put up for sale in the 1990s, although no other rivals have so far entered this ring to challenge it.
So, who would be willing to take on such a leviathan? One strong contender has to be Oger. As TI already has a 40% stake in Avea, it may be uniquely placed should Oger win the bidding.
The other consortium getting good odds at the bookies is Etisalat. Hailing from the UAE, it is cash rich and has declared expansion plans.
However, some analysts also point to a further and rather large fly in the ointment. Following the collapse of the business empire belonging to the Uzan family, their GSM operator, Telsim - ranked second in the Turkish market - will also come up for sale sometime in the next year. This will come without the extra baggage of a fixed-line network and has some 6m subscribers. If anyone is seriously interested in a Turkish GSM operator, some analysts argue, why not wait for a much more palatable option?
Yet for all that, TT remains a major telecoms player. With some 19m fixed-line subscribers, a major ADSL network building and international connectivity, it is not all gloom and doom. However, just how positive a view the four bidders have taken of TT remains to be seen, as the envelopes await their Friday opening in the safe of the OIB.