April 14, 2008 / 3:04 PM / 12 years ago

UPDATE 1-Turkcell continues talks on Syriatel stake

(Adds second statement from Turkcell, stock price)

By Ercan Ersoy

ISTANBUL, April 14 (Reuters) - Turkish mobile operator Turkcell (TCELL.IS)(TKC.N) is still in talks for a majority stake in Syriatel, despite fresh U.S. sanctions against the Syrian operator’s owner, the Turkish company said on Monday.

A source familiar with the deal told Reuters that the talks were taking longer than expected because some Turkcell executives had U.S. passports. But Turkcell said that “any possible U.S. citizenship held by management” would not affect the process.

Turkcell, Turkey’s largest mobile operator, is listed in Istanbul and New York.

In February, the United States froze the assets of Syriatel owner Rami Makhlouf under economic sanctions aimed at stepping up pressure on Damascus.

Washington said Makhlouf benefited from corruption in the Syrian government, and the measures against him forbid U.S. citizens or entities from doing business with him.

“The talks on the Syrian matter continue,” Turkcell told Reuters in a statement on Monday.

“We are aware of the situation between the United States and Syria. But since Turkcell is a Turkey-based company and there is no legal restriction on the purchase of Syriatel, the situation does not have any impact on the talks,” it said.

Turkcell CEO Sureyya Ciliv told Reuters in late February that he had expected to complete talks with Syriatel in a month and Makhlouf said around the same time that talks with the Turkish operator were continuing.

Kuwait’s Mobile Telecommunications Co (ZAIN.KW) (Zain) said last month it was also interested in Syriatel, saying then that it was still an open competition.

Makhlouf, the cousin of Syrian President Bashar al-Assad, owns 69 percent of Syriatel. Gulf investors and Syrian shareholders own the rest of the company, which controls HITS-Unitel, a Yemeni cellphone operator. Turkcell CEO Ciliv said in February that Syriatel had 3.4 million subscribers and a 54 percent market share.

On Monday Turkcell stock fell 4.5 percent in Istanbul, bringing its losses since April 9 to 12 percent, compared with a 3 percent fall on the main index .XU100.

Analysts attributed the fall to an initial public offering for fixed-line operator Turk Telekom due in May, which they expect will draw funds out of Turkcell in favour of the newly listed company. (Editing by Quentin Bryar; Editing by Erica Billingham)

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