Billionaire Fridman Demands Governance Overhaul at Turkcell

16 Nov 2021, 04:06 PM IST

(Bloomberg) -- Russian billionaire Mikhail Fridman’s LetterOne is pushing for a corporate governance overhaul at Turkcell Iletisim Hizmetleri AS, Turkey’s largest mobile operator.

Turkcell should set up a new board committee to review its cost structure, asset monetization plans and capital allocation, LetterOne said in a statement Monday. LetterOne said the carrier can deliver “substantially more” value and become a market-leading digital telecom company if changes are implemented.

Shares of Turkcell rose as much as 3.4% on Tuesday. They were up 0.7% at 1:26 p.m. in Istanbul, giving the company a market value of about $3.8 billion.

LetterOne owns 19.8% of Turkcell, making it the company’s biggest independent shareholder. The wireless carrier should also create a new incentive plan to align management with shareholders, LetterOne said in the statement, adding that Turkcell so far has rejected its proposals.

“Ambitious change is needed to the business’ approach to corporate governance,” LetterOne Managing Director Ben Babcock said in the statement. “We have written to the board to raise concerns and look forward to a constructive dialogue.”

Wealth Fund

The investment firm said in a letter to Turkcell directors that it’s “frustrated and disappointed” with the performance, strategic direction, execution and valuation of Turkcell under the board’s stewardship.

“Investors have lost confidence in the future of Turkcell,” it said in the letter, which was made public in a filing Monday. “We are also deeply concerned about the governance regime at Turkcell and believe the board lacks the necessary skills, experience and accountability.”

Companies backed by Fridman have held an interest in Turkcell for the last 16 years.

Turkcell’s board has expressed in writing its disagreement with the “allegations” made by LetterOne, the company said in an exchange filing Monday, adding that it “welcomed feedback” from shareholders. The board continues to implement the most efficient internal governance tools for the sake of all investors and sets targets to achieve sustainable long-term performance, Turkcell said.

The nation’s sovereign fund, whose chairman is Turkish President Recep Tayyip Erdogan, became Turkcell’s largest shareholder last year in a deal that gave it control of the board. The move ended a 15-year-long fight for control of Turkcell, which was previously part-owned by Swedish telecom firm Telia Co.

Turkey set up its wealth fund in 2016 and tasked it with taking a lead role in making investments deemed too big for the private sector. It has amassed billions of dollars in assets, building a portfolio that now consists of nearly two dozen companies across eight industries. It’s already merged state-owned insurance companies and injected cash into state banks to boost their lending power during the pandemic.