November 10, 2017 / 1:05 PM / 2 years ago

UPDATE 1-Russia's Alfa interested in buying Cukurova's Turkcell stake - sources

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By Ebru Tuncay and Can Sezer

ISTANBUL, Nov 10 (Reuters) - Russia’s Alfa Telecom is interested in increasing its stake in mobile operator Turkcell by buying out Turkish firm Cukurova, which missed a recent debt repayment and could consider offers, two sources close to the matter told Reuters.

If the offers are attractive, Cukurova may consider selling its 13.8 percent stake in Turkcell, given as collateral to Turkey’s Ziraat Bank in 2014, in order to pay a $1.6 billion loan from the bank, the sources said.

After having failed to fully pay the first installment of its debt to Ziraat, following the expiry of a three-year grace period on the 10-year loan, pressure to find cash to complete the payment is pushing Cukurova to consider selling the stake.

Under an agreement signed in 2015, Cukurova has to ask Alfa first. Sources say Cukurova may also be interested in selling to other buyers.

Cukurova, Ziraat and Turkcell declined to comment. LetterOne said: “We never comment about any market or arbitration rumours.”

Turkcell has been hampered by a long running feud between three of its shareholders: Cukurova, owned by Turkcell founder Mehmet Emin Karamehmet, Russian billionaire Mikhail Fridman’s Alfa Telecom and Sweden’s Telia Company.

Fridman’s LetterOne indirectly holds 13.2 percent of Turkcell, while Karamehmet’s Cukurova indirectly holds a 13.8 percent stake. Telia owns 24 percent. As part of Turkcell’s labyrinthine share structure, Fridman’s interests are held through a subsidiary, Alfa Telecom Turkey.

For years the bitter feud between the stakeholders halted dividend payouts as the board was unable to call shareholder meetings. Turkcell paid out dividends for the first time in years in 2015, with LetterOne receiving nearly $200 million, according to its website.

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

But last November 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.

One of the sources said Cukurova maintains that Alfa’s justification for not buying the stake is an incorrect reading of the law, saying Alfa was obliged to buy the stake.

Cukurova appealed in July 2017 for a new arbitration against LetterOne, maintaining that LetterOne is obliged to buy the Cukurova shares, the source said. (Reporting by Can Sezer and Ebru Tuncay; Writing by Tuvan Gumrukcu; Editing by Dominic Evans)

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