UK court ruling unlikely to draw line under Turkcell row
* UK Privy Council set to rule on March 4
* Cukurova determined to recover stake
* Could liquidate assets including Genel Energy
* Altimo likely to remain a shareholder
By Asli Kandemir
ISTANBUL, Feb 27 (Reuters) - A British court ruling next week which could help the Turkish co-founder of Turkcell recover a controlling stake may do little to end a boardroom dispute that has hobbled the firm for years.
The shareholder battle pits the Cukurova Holding company owned by Mehmet Emin Karamehmet, one of Turkey's richest tycoons, against Altimo, the telecoms arm of Russian billionaire Mikhail Fridman's Alfa Group.
It centres around a 13.8 percent controlling stake in Turkcell which Altimo appropriated from Cukurova after it defaulted on a $1.35 billion loan eight years ago.
Britain's Privy Council will decide on Monday how much Cukurova would have to pay to recover the stake, with sources involved in the proceedings expecting the figure to be somewhere between $1.6 billion and $3.0 billion.
"Cukurova is determined to pay the money and get back the shares. But the final decision will be Karamehmet's," said one source close to the proceedings.
The Privy Council ruled last month that while Altimo had been entitled to take over the controlling Turkcell stake, Cukurova also had the right to recover it if it paid the outstanding loan plus interest and costs.
The row has left Turkcell unable to agree the composition of its board, distribute dividends or pursue a coherent growth strategy for several years.
Turkcell shares have risen around 8 percent since last month's Privy Council ruling, partly buoyed by hopes that the court's decision on Monday will draw an end to the dispute.
But the row is part of a deeper boardroom rift - with Karamehmet, who co-founded Turkcell almost two decades ago, on one side, and Alfa Group and fellow shareholder TeliaSonera on the other.
Turkcell recovering the controlling stake is unlikely to resolve the broader dispute.
Altimo will not give up its 13.2 percent stake in Turkcell even if Cukurova wins back control, a source close to the Russian firm said, and will continue to work as an active shareholder alongside TeliaSonera, which holds 37 percent.
"Altimo has faith in the Turkish investment not only because of the potential of the Turkish market ... but also thanks to Turkcell's favourable positioning for regional expansion," Altimo Vice President Yevgeny Dumalkin said.
"We would like to see Turkcell among global market leaders in 5-7 years ... and we know how to maximise its value on the market," he told Reuters.
POSSIBLE ASSET SALES
Whether Karamehmet shares that vision is an open question.
After co-founding the telecoms firm in 1994, he was forced to quit as chairman in 2010 as Altimo and TeliaSonera tried to limit his influence, although he still managed to install ally Colin Williams as his successor.
Altimo and TeliaSonera regard Williams, a designated independent board member, as a proxy for Karamehmet and the three have been unable to agree on the composition of the board since then, prompting warnings from the Turkish market regulator and the threat of legal action from minority shareholders.
Sources involved in the process said that if Cukurova regains the disputed stake it may then seek to bring a legal case against Altimo and TeliaSonera for breaching shareholder agreements by conspiring against it.
Key to Cukurova recovering the disputed stake will be how the court calculates the interest rate on the loan.
Sources say Cukurova wants global borrowing rates applied - which would bring the cost to around $1.8 billion - while Altimo argues default rates should be used, raising it to some $2.5 billion.
Cukurova has looked into raising a loan of up to $2 billion to secure the stake, with foreign banks expected to structure the deal, although no lenders have yet been mandated pending the outcome of Monday's ruling.
"There are many foreign banks angling for the loan but there is no exclusivity as the amount is as yet unknown," one source familiar with Cukurova's plans said.
The source said that if the court set a figure below $1.9 billion, Cukurova may be able to use Turkcell's potential future dividends as collateral, but if it went as high as $2.5 billion it may have to liquidate assets such as stakes in oil firm Genel Energy, steel maker Noksel Celik Boru, Swiss bank BCP or satellite television provider Digiturk.
"If the court rules that Cukurova has to pay around $3 billion ... it may or may not be feasible," the source said.
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