Vodafone won an auction for the Turkish carrier last December which was broadcast live on Turkish television. The Newbury, UK-based operator won with a bid of $4.55bn in an open auction tender where the highest bid won.
There were seven bidders in the running, most of them from the Middle East. These included Etisalat (UAE), Orascom (Egypt), MTC (Kuwait), and International Investment and Telecommunications (UAE). The three European bidders were Vodafone (UK), Systema (Russia), and Endeks (Germany). France Telecom SA and Norwegian carrier Telenor ASA had earlier withdrawn from the auction.
Vodafone had not been one of the favorites to win the auction, but the purchase was part of its desire to expand into developing markets in order to drive growth. In early November 2005, it paid ZAR 16bn ($2.41bn) to raise its stake from 35% to 50% in South Africa’s largest mobile operator Vodacom (Pty) Ltd, and in October 2005 Vodafone paid INR 67bn ($1.49bn) to re-enter the Indian market when it purchased a stake of just over 10% in Bharti Tele-Ventures Ltd, India’s mobile market leader. In March 2005, it acquired Romanian mobile phone group Mobifon SA, and rapidly growing Czech wireless operator Oskar Mobil AS.
Turkey is an attractive market because the country of 72 million people has only a 53% mobile penetration rate. This will provide Vodafone with plenty of scope for growth, unlike the heavily saturated western European markets.
The clear market leader in Turkey is Turkcell, which at the end of 2005 had nearly 27 million subscribers. Vodafone’s Telsim is the second largest mobile operator with approximately 11 million subscribers. Third is Avea, a partnership between Turk Telekom and Telecom Italia Mobile, with about 6.5 million users.
The auction was good news for mobile giants Motorola Inc and Nokia Corp. In early 2005, Telsim had been found guilty of cheating Motorola out of $2bn in loans. 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 owed Nokia approximately $900m. Both since settled their lawsuits against the Turkish operator, and were expected to receive a sizable percentage of the proceeds of the sale.
Telsim also owed $700m to the Turkish Treasury, telecommunications board, and the finance ministry. The Turkish operator had in effect been in receivership since February 2004 when state authorities seized 219 companies that belonged to its owner, the Uzan family, whose business empire collapsed in 2003 after a large-scale fraud scandal.
