* Government wants Turkcell to stay in Turkish hands
* Deal expected to be reached with Turkish partner
* Shareholder dispute has left Turkcell hamstrung
By Asli Kandemir and Orhan Coskun
ISTANBUL, June 10 Turkey's Cukurova Holding is close to securing financing from a local partner to recover a disputed stake in the country's biggest mobile phone operator Turkcell, three sources close to the matter said on Tuesday.
Cukurova and Altimo, the telecoms investment arm of Russian billionaire Mikhail Fridman's Alfa Group, have been fighting for 7 years for control of Turkcell, choking decision-making at the firm and preventing the payment of dividends.
The Turkish government is keen for Turkcell to remain in Turkish hands and has been pushing for a local corporate partner to help Cukurova raise the $1.6 billion it has been ordered to pay to recover the stake, the sources said.
"Both Cukurova and Turkey will be unhappy if Cukurova fails to get the stake back. It's unavoidable for a new player to be involved. This will be acceptable to both Cukurova and the Turkish government," one of the sources said.
"The government does not want to be dealing with a financial creditor. There will be a strategic creditor involved ... Cukurova would not have to put additional owners' equity in this financing package," the source said.
Two of the three sources said Cukurova would obtain financing from Turkish conglomerate Yildiz Holding. Turkey's largest food group declined to comment.
Cukurova said on Wednesday it was in talks with undisclosed institutions to arrange financing to pay Alfa.
One of the sources said the financing deal was expected to be concluded next week.
Britain's Privy Council ruled last July that Cukurova, owned by one of Turkey's richest men, Mehmet Emin Karamehmet, must pay around $1.6 billion - a sum which includes interest payments - to Altimo within 60 days if it wants to recover the stake.
It subsequently extended the deadline, most recently to June 24. Altimo appropriated the 13.8 percent stake - a controlling stake due to Turkcell's complex ownership structure - when Cukurova defaulted on a $1.35 billion loan.
"The Turkish government has been looking into this very closely. They've almost found a solution for the stake to remain in Turkey," the third source close to the matter said.
Cukurova is registered in the British Virgin Islands, which is why the case is being dealt with by Britain's Privy Council, the final court of appeal for some countries in the Commonwealth, a grouping of countries which are mostly former territories of the British Empire.
(Writing by Seda Sezer; Editing by Nick Tattersall and Louise Heavens)