November 30, 2016 / 4:35 PM / in a year

UPDATE 1-Turkcell shareholder Cukurova accuses Russian rival of arbitration violation

(Recasts, adds details, background)

ISTANBUL, Nov 30 (Reuters) - Cukurova Holding on Wednesday accused its rival shareholder in Turkcell of violating an arbitration ruling by failing to buy out its stake, the latest salvo in a decade-long struggle for Turkey’s top mobile operator.

Turkcell has been hampered by protracted feuding between three of its shareholders: Cukurova, owned by Turkcell founder Mehmet Emin Karamehmet, Russian billionaire Mikhail Fridman and Sweden’s Telia Company.

For years the bitter feud even halted dividend payouts as the board was unable to call shareholder meetings.

Under a London arbitration court decision handed down in August, Fridman’s LetterOne Technology won the right to buy out Cukurova this month after Cukurova failed to exercise its option to buy out Fridman.

But on Tuesday, LetterOne said its Turkish affiliate Alfa Telecom Turkey was unable to buy the stake due to an earlier court injunction in the British Virgin Islands that barred Cukurova from transferring its Turkcell shares.

“By not fulfilling this obligation, Alfa has clearly violated the London tribunal ruling,” Cukurova said in a statement. It was not immediately clear if it would look to pursue legal action against the Russian investor.

A spokesman for LetterOne was not immediately available to comment. Shares in Turkcell fell by more than 3 percent on Tuesday and Wednesday, reflecting investor disappointment that the feud had not been settled.

The legal battle has generated its own lengthy Wikipedia entry and been compared by one legal observer to a low-budget horror movie for its seemingly “inexhaustible supply of sequels”.

The injunction that barred LetterOne from buying the stake was granted on behalf of Telia after Cukurova refused to pay an outstanding debt to the Swedish company. Including interest, the debt is now worth $1.1 billion, according to LetterOne.

LetterOne indirectly holds 13.2 percent of Turkcell, while Karamehmet’s Cukurova indirectly holds a 13.8 percent stake. Telia owns 37 percent.

The dispute between Fridman and Karamehmet became public knowledge when Fridman’s Alfa seized Karamehmet’s stake, saying Cukurova had defaulted on a 2005 loan agreement for which the shares were pledged as collateral. (Reporting by Humeyra Pamuk; editing by David Dolan and David Clarke)

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