Türk Telekom bids to buy rest of mobile firm Avea

Saudi-owned Türk Telekom, which also reported a 93 percent drop in quarterly earnings, owns 90 percent of Turkey’s third-largest mobile company, with the remainder held by lender İş Bank and other investors.

Under a 2006 shareholder agreement, IS Bank retains the right to demand an initial public offering this year, a floatation that would likely be hampered by Avea’s weak earnings, analysts said.

“Even if Avea is advancing towards profitability, right now it is still not profitable,” said Toygun Onaran, an analyst at TEB Invest. “It is logical for İş Bank to want to offload the shares.”

Türk Telekom did not say how much it would pay for the Avea stake, which it said had a “nominal value” of 820 million lira ($300 million). That would value the company at $3 billion. That’s a “very high” valuation, Onaran said, adding he estimated Avea was worth around 40 percent of that.

Like many telephone companies, Türk Telekom faces a gradual decline in demand for fixed-line services, meaning the performance of its mobile arm is critical.

But Avea is in a tough position as the third player in a market dominated by Turkcell and, to a lesser extent, Britain’s Vodafone.

Türk Telekom’s majority shareholder, Saudi Oger, faces a similar fight in South Africa, where it owns struggling mobile company Cell C, which is also third-ranked in a competitive market.

The fixed-line company reported a big fall in first- quarter net profit, hit by higher capital spending and the sharp decline in the Turkish lira. It has overseas operations and most of its currency exposure come from financial liabilities and trade payables, it said.

Türk Telekom said it was “continuing to evaluate” participation in a tender for 4G frequencies, the bids for which are due on May 26.

The future of that tender was thrown into doubt this week, when President Tayyip Erdoğan said Turkey should wait and then jump straight to 5G.