PRIVATISATION PROCESS

Privatization endeavour of Türk Telekom has been a milestone in Turkish privatization history. It is the objective of the Republic of Turkey to foster a viable and competitive telecommunications sector, to attract world-class partners for Türk Telekom with a view of increasing efficiency and service quality as well as executing the privatization process on a timely basis responding to market conditions. In search of an interactive process, a market testing study has been undertaken during September and October 2003, in order to design the most pertinent privatization strategy for Türk Telekom.

Consequently, the market testing study is completed during the months of September and October in 2003 and the Council of Ministers Decree encompassing feedback received during the aforementioned market testing study was issued on November 13, 2003. Accordingly, minimum 51% of Türk Telekom shares were to be offered as a block sale of company shares, while following the block sale the remaining shares could  be privatized under various privatization methods including the public offering. Turkey has secured an investment friendly environment for privatizations with regulations matching European standards. With the enactment of law 5189, the foreign ownership restriction on the part of foreign investors has been lifted, the scope of the golden share has been restructured and the satellite business has been taken out of Türk Telekom to function as a separate public entity.

In this framework, an Informatory Process was launched prior to the official tender announcement whereby, the Privatization Administration has info rmed the interested parties about the forthcoming process and delivered info rmation about Türk Telekom. 11 national and international companies registered to the Process and they were provided with operational, legal and technological data of Türk Telekom as well as the upcoming privatization process. Participation to the Informatory Process was not a pre-requisite for participating the official block sale tender.

The Council of Ministers Decree dated October 15, 2004 number 7931 resolved for the sale of 55% of Turk Telekom by block sale method and the tender announcement be made until December 31, 2004. The same Council of Ministers Decree authorized the Türk Telekom Tender Commission for the application of pre-qualification criteria during the tender process.

The formal tender process for the block sale of 55% of Türk Telekom commenced with the tender announcements on November 25, 2004. Accordingly to be able to submit bids, bidders were required to satisfy the pre-qualification criteria determined by the Tender Committee. Applications for pre-qualification were delivered to the Privatization Administration until January 11, 2005 where 13 national and international bidders qualified. The due diligence and data room process was conducted in February, March, and April 2005.  Four bids were submitted on the bidding deadline for the privatization of 55% of Türk Telekom shares. The Tender Committee first evaluated the business plans and all four bidders who received scores over 75 points from such evaluation, were invited to the opening of the financial bids on July 1, 2005. After the joint bargaining process, Oger Telecoms Joint Venture Group submitted the highest bid, with 6.550.000.000 US Dollars and the Etisalat Joint Venture Group submitted the second highest bid with 6.500.000.000 US Dollars for the block sale of 55% of Türk telekom shares. The result of the tender has been approved by the Council of Ministers and has been published in the Official Gazette dated  02.08.2005 and has become effective.

The Share Sale Agreement, the Shareholders Agreement, the Share Pledge Agreement and the Concession Agreement were signed on November 14, 2005. With the signing of these agreements, 55% of Türk Telekom shares were transferred to Ojer Telekomünikasyon A.Ş. (Consortium led by Saudi Oger and Telecom Italia) and consequently, Türk Telekom ceased to be a public company.

The Concession Agreement was signed on the same day between Türk Telekom and the Telecommunications Authority.

The block sale of 55% of Türk Telekom was awarded by the “Acquisitions Monthly”; an international prestigious finance journal, as the “Emerging Market Deal of the Year 2005”. Consequently, this is the first time that a Turkish merger and acquisition transaction was awarded at the international scale.

Finally, the Council of Ministers Decree dated November 13, 2003 number 2003/6403 stipulated  that the percentage and the timing of the public offering would be determined following the block sale. Following the completion of the block sale, preliminary studies regarding the privatization of the some of the  remaining  shares owned by the Treasury commenced. Within this framework,  the Council of Ministers Decree dated December 10, 2007 number 12973 stipualted that; 15% of Türk Telekom shares would be privatized through public offering until December 31, 2008. 

As per the provisions of Law 406, which requires  that 5% of Türk Telekom shares must be allocated  to the employees of Türk Telekom as well to those of  the  General Directorate of Postal and Telegram Services as well as small retail investors, the Council of Ministers Decree dated December 10, 2007 stipulates that 3% of Türk Telekom shares will be allocated to the aforementioned employees and small retail investors.   

40 % of Türk Telekom shares were offered to domestic investors, while 60% of the shares were allocated to foreign institutional investors. 210.000.000 shares out of 525.000.000 shares were sold  to domestic investors, while 315.000.000 shares were sold to foreign institutional investors. The IPO of Türk Telekom constitutes not only the largest IPO ever in the Republic of Turkey, but also the largest telecoms IPO globally for the last four years. Türk Telekom has been trading at the Istanbul Stock Exchange (ISE) under the symbol TTKOM since May 15, 2008.

Please note that this document is prepared for information purposes only. The Privatisation Administration reserves all rights to modify the content of this document. In the event that any discrepancy arises from this document, the opinion of the Privatisation Administration shall prevail.