Essentially, Telsim has been found guilty of cheating Motorola out of $2bn in loans. It was back in mid June that a panel of arbitrators from the Zurich Chamber of Commerce issued a final award of $2.5bn, including interest, to Motorola. Telsim had apparently borrowed nearly $2bn from Motorola in order to finance the building of a Motorola-constructed mobile phone system in Turkey. Telsim also owes Nokia Corp approximately $900m.
Needless to say, Telsim failed to pay for the network’s cost, despite the operational success of the venture, which has approximately 8 million subscribers and is currently the second largest mobile operator in Turkey. Sector analysts say the operator is worth around $4.25bn, based on a calculation of $500 per subscriber.
Telsim has forced Motorola (and Nokia) to go through three years of contested legal proceedings as the outfits tried to recover their money. The problem stems from the fact that Telsim was seized from the Uzan family, in order to help recover $6bn that Turkey spent to cover losses at Turkiye Imar Bankasi AS, the Uzan-controlled bank that failed.
Following the bank’s failure, a state banking body took over Telsim and hundreds of other firms belonging to the Uzan family last year. The Savings Deposit Insurance Fund (TMSF) is hoping to sell Telsim to help recover the $6bn debt, and a number of large mobile operators, including Vodafone Group Plc, have expressed an interest in acquiring the troubled Turkish outfit.
Indeed, it should be noted that TMSF has been in talks with Motorola and Nokia since June 2004 on paying part of the money it owes them. At the start of 2005 a deal was reached, with TMSF saying it would pay 20% of revenues from the sale of Telsim to Motorola (or at least $400m), and 5% of the sale revenues to Nokia (or at least $100m). However, the deal came unstuck when the Turkish President, Ahmet Necdet Sezer, vetoed in the spring a law that would have facilitated the sale of assets held by TMSF.
This meant that Motorola pressed ahead with the legal proceedings over the continued non-payment, and the arbitral panel rejected Telsim’s defence. In late June therefore, the Supreme Court of Canton of Zurich (Switzerland) confirmed that Telsim had not sought to appeal the award, and that the award to Motorola was final and enforceable.
As a result, Motorola has now begun to enforce the final award worldwide. This week, courts in the US and the UK granted Motorola’s request to attach the international roaming and interconnect revenues Telsim has earned in those countries. As the result of the decisions from the US and UK courts, Motorola will be able to attach and/or freeze the monies other carriers would have otherwise paid to Telsim for international roaming and interconnect services.
Motorola is also continuing aggressively to enforce the judgement for $2.13bn rendered on behalf of Motorola against the Uzan family of Turkey for perpetrating a massive fraud against Motorola relating to the Telsim loans, the company said in a statement.
However, it seems unlikely Motorola will see any money soon. To date, Motorola has collected only a few million from the sale of yachts, homes and planes it seized from the Uzan clan.
Last time Motorola saw Telsim’s books, the Turkish operator had $1bn in sales. By targeting Telsim’s roaming and interconnect fees, Motorola could get about 15 % of the $2.5bn it is owed. At the moment, Motorola has won the right to collect only in the UK and US, but even if courts all around the world give it collection rights, Motorola might tally about $100m a year. At that rate, it would take Motorola until 2030 to collect the full amount it is owed.
