UPDATE: Nokia Reaches Agreement On Telsim Claims

STOCKHOLM -(Dow Jones)- Nokia Corp. (NOK) said Monday it has reached a deal with the Turkish government that enables it to recoup claims against Telsim, Turkey's No.2 wireless operator, once the business is sold later this year.

The Finnish telecommunications equipment maker and U.S. rival Motorola Inc. (MOT) have long been trying to recover billions of dollars in loans they granted Telsim to build its wireless network in 2000. Legal wrangling and talks over settling the outstanding claims have delayed the sale of Telsim.

Under the terms of the agreement with the Turkish Savings and Deposit Insurance Fund, or TMSF, which controls and manages Telsim, Nokia will get a payment following completion of the sale. The final amount depends on how much TMSF raises from the auction, which is slated for December.

"Nokia sees this as a positive step in a consistent and cooperative approach to resolving the issue, and also trusts that it will facilitate a successful sale of Telsim's assets," the company said in a statement.

Arja Suominen, spokeswoman for Nokia, declined to give further information or specify the level of payment Nokia expects. "We have agreed not to disclose any details regarding the agreement," she said.

Nokia's claims arose from Telsim's default on loan repayments. The Espoo, Finland-based company has since written down EUR669 million for its exposure to the Turkish wireless network operator.

Telsim is among assets that were taken over by Turkey from the bankrupt Uzan family.

Motorola said it will continue to take all lawful means to recover the $2 billion it is owed by Telsim as well as seek damages from the Uzan family. "To date, TMSF has been unable to provide Motorola with adequate certainty of payment," spokeswoman Jennifer Weyrauch said.

Telsim's debts to Motorola and Nokia total almost $3.4 billion, TMSF President Ahmet Erturk said last week, according to the Ihlas news agency.

Turkey aims to sell former Uzan assets, including Telsim and Star Media Group, to recoup the $6 billion it spent to cover losses at the failed Imar Bankasi AS, the former banking flagship of the Uzans.

TMSF values Telsim at $2.8 billion, and this is likely to form the starting point for the auction. The bidding deadline is Dec. 5, with the auction to take place Dec. 13.

Analysts say the Telsim sale will likely garner interest from major European telecoms operators wanting to enter a faster-growing region than their own domestic markets.

Telsim is Turkey's second-largest cellphone operator after Turkcell (TKC) and has 8.25 million active subscribers.

Analysts said TMSF's agreement with Nokia removes some of the uncertainty hanging over the upcoming sale.

Greger Johansson, an analyst at Redeye, said that for Nokia, the deal is not material for the valuation of the stock, though the final sum will boost earnings significantly in the quarter that it is booked.

Nokia has remained a supplier to Telsim but has made only occasional deliveries since 2000. "We hope to be a supplier to Telsim also in the future," spokeswoman Suominen said.

At 13.28 GMT, Nokia shares were trading up 0.4% at EUR12.58 in a slightly weaker overall market.

Company Web site: http://www.nokia.com

-By Magnus Hansson, Dow Jones Newswires;+46 8 545 130 91, magnus.hansson@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 29th August 2005