New energies are sweeping through the Turkish telecom market, following the new 406 telegram and telephone law enacted in January. As part of the government’s rapid advance towards privatization, the new law drastically changes the Turkish telecom policy framework, while creating major telecom business opportunities.
The law is the result of two factors: the first, a requirement by the World Trade Organization (WTO), of which Turkey is a member, to liberalize the basic telecom service market by December 2005. The second, an IMF-backed economic reform program, signed in late 1999, by which the Turkish government pledged to target by years-end $7.6 billion in privatization revenues in order to reduce inflation from the 1999 figure of around 65 percent, to a single digit number.
The law is mainly directed at the 100 percent state-owned Turk Telecom Company (TT), which historically monopolized the country’s telecom networks infrastructure. The company provides a variety of telecommunications services from basic voice telephony to several other value-added services (such as analogue mobile telephony, cable TV network, the Internet backbone, communication satellites, data, paging, etc.).
While preserving TT’s monopoly on basic voice telephony until 2004, the new law sets to privatize the company by the end of 2003 and gradually open the Turkish telecom market to competition.
In what is expected to be the most significant move since Turkey’s privatization drive was initiated 15 years ago, 49 percent of TT are to be sold as follows: 20 percent of the shares will go to a strategic core investor consortia (the tender is to close on September 15). The remainder shares will be sold through domestic and international public offerings, following the block sale. At least 5 percent of the total shares are reserved for employees of both TT and the general directorate of post and telecommunication (PTT), and to small local investors.
In moving towards market liberalization, TT’s block sale is accompanied by two GSM license tenders. A consortium led by Telecom Italia and the Turkish bank, Is Bankasi, has already won the first license in April. The consortium offered $2.525 billion for the license — a price far above the $1-1.5 billion figure expected by analysts — making it Turkey’s biggest state sell-off yet.
Another 1,800 MHz license is offered to TT at the price of the Is Bankasi-Telecom Italia deal, in order to boost its 20 percent block sale.
In working towards a competitive telecom market where the operators and the regulatory bodies are instituted separately, the new law finally established an independent regulatory authority, named the Telecommunications Administration (TA). This five-member board is to be the supreme body regulating the market in setting price ceilings, adopting new technology, importing equipment and protecting consumer rights.
Fatih Mehmet Yurdal, head of the board hopes the TA will be "free from any bonds to the Communications Ministry, Turk Telekom or any other authority," and has therefore announced that the TA demands the right to issue licenses for new Mobile service operators. "The present situation is that the ministry issues licenses, but we have to regulate the market. We think we have to have full control over such things," He explained. — (Albawaba-MEBG)
