THEY SAID IT COULDN'T BE DONE - TURK TELEKOM

UNCLAS ANKARA 006701

SIPDIS

SENSITIVE

USTR FOR LERRION
TREASURY FOR CPLANTIER
USDOC/ITA/MAC/RUSNAK
DEPT PASS EXIM FOR MARGARET KOSTIC

E.O. 12958: N/A
TAGS: ECPS EFIN EINV BEXP TU
SUBJECT: THEY SAID IT COULDN'T BE DONE - TURK TELEKOM
FINALLY PRIVATIZED

Refs: A. 04 ANKARA 6673


B. 05 ANKARA 446

C. 05 ANKARA 2159

D. 05 ANKARA 2812

E. 05 ANKARA 3845

F. 05 ANKARA 6537


1. (U) Summary: In a major step forward for economic
reform in Turkey, the $6.55 billion sale of a 55% share
of Telekom (TT) deal was finalized on November 14. In a
ceremony attended by the Ministers of Transport and
Finance, the Saudi-owned Oger Group and TT signed the
final concession contract, thereby completing the sale.
The completion of the privatization marks a watershed in
the GOT's efforts to privatize key industries since Turk
Telekom was long considered too "strategic" to be
relinquished by the state, especially to foreigners. The
final sale also bodes well for the two other large-scale
tenders - Erdemir and Tupras - that are still in the
process of being finalized. End summary.


2. (U) Despite last-minute speculation that the Oger
group would not accept changes to the concession contract
requested by the Council of State (Danistay),the group
announced on November 10 that the deal would go through
as planned. In a November 14 ceremony that included
speeches from Oger Telecom Vice President Mohammad
Hariri, Privatization Authority President Metin Kilci,
Transportation Minister Binali Yildirim, and Finance
Minister Kemal Unakitan, TT and Oger Telecom signed the
deal. In addition, the Oger group paid the first
installment of $1.3 billion, 20 percent of the total
sales price. These funds will provide a significant
boost to state revenues and to foreign direct investment
in this year's balance of payments.


3. (U) In the first order of business following the
completion of the sale, Oger Telecom was scheduled to
announce its six representatives to serve on the new 10-
member administration board. Oger Telecom's Hariri
emphasized that the group is willing to invest in TT's
current employees and management. In his remarks during
the ceremony, Finance Minister Unakitan stressed the
important message this sale sent to investors worldwide,
that Turkey is committed and able to privatize.


4. (SBU) Comment: It is hard to overemphasize the
importance of the GOT finally consummating the sale of
TT. The sale symbolizes the GOT overcoming Turkey's
legacy of dirigisme and economic nationalism. For years,
many observers were skeptical the GOT would ever
relinquish control of this "crown jewel," and this year
the GOT had to fight a wave of anti-privatization
sentiment to do so. The TT signing is also a positive
indicator for the upcoming Erdemir and Tupras
privatization transactions. The major investment by a
Middle Eastern group in Turkey also shows the increasing
integration of Turkey into the global and regional
economy at the same time as it seeks to join the EU.
McEldowney