Turk Telekom Owner's Bailout Said to Stumble Over License

(Bloomberg) -- A plan to bailout the majority owner of Turkey’s biggest phone operator is being hindered because the operator’s license doesn’t leave enough time for potential buyers to recoup their investments, according to people familiar with the matter.

Saudi Telecom Co. and investors from Qatar had looked into acquiring a stake in Ojer Telekomunikasyon AS, which owns 55 percent in the Ankara-based Turk Telekomunikasyon AS, said three people with direct knowledge of the matter who asked not to be named because the matter isn’t public. Investors may be swayed into making the purchase if regulators extend Turk Telekom’s license beyond its expiry in 2026, said the people.

Ojer Telekomunikasyon, knows as Otas, depends on dividends from Turk Telekom to service a $4.75 billion loan it took out in May 2013. A 50 percent slump in the lira against the dollar since the inception of the loan has eroded the value of dividends the company receives in the local currency. Otas, wholly owned by Lebanese Hariri family’s Oger Telecom, missed two repayments of $290 million each in September and March on the borrowing, the biggest syndicated loan by a Turkish company to date.

After posting its first loss since 2005 last year, fortunes may improve for Turk Telekom in 2017 as it starts to reap the benefits of a program to integrate its mobile, broadband, fixed-line and data services, said Alper Ozdemir, an analyst at Oyak Securities in Istanbul. The company may make a net profit of 1.2 billion liras ($333 million) this year and pay 1.1 billion liras in dividends in 2018, he said.

Dividend Payouts

The stock of Turk Telekom shares rose 0.7 percent to 6.01 liras by 5:43 p.m. in Istanbul, extending gains this year to almost 14 percent.

Turk Telekom has distributed 13.2 billion liras in dividends to shareholders, which includes 25 percent held by the Turkish Treasury and 6.7 percent by Turkey’s wealth fund from the treasury earlier this year, according to the company’s website. Otas has received 7.3 billion liras through its 55 percent stake.

The loan was originally secured from 29 Turkish and international lenders including Akbank TAS, Turkiye Garanti Bankasi AS, Turkiye Is Bankasi AS and BNP Paribas that were among bookrunners. Akbank’s exposure to the loan stands at $1.5 billion, while that of Garanti at around $1 billion, people with knowledge of the matter said on Oct. 27.

A plan by Saudi Telecom, which owns 35 percent in Oger Telecom, to buy a direct stake in Otas failed as the lenders rejected a $1 billion reduction in the original loan amount in exchange for the STC investment, people with knowledge of the matter have said.

Turk Telekom and Oger Telecom declined to comment. Saudi Telecom wasn’t immediately available for comment.

(A previous version of this story was corrected to change millions to billions in the chart.)

--With assistance from Kerim Karakaya

To contact the reporter on this story: Ercan Ersoy in Istanbul at eersoy@bloomberg.net.

To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Vernon Wessels