Cukurova in Violation of the Turkcell Shareholder Deal

An arbitration tribunal of the International Chamber of Commerce in Vienna has issued an award finding that Turkey's Cukurova has violated certain share transfer restrictions in the shareholders' agreement between Cukurova and TeliaSonera relating to Turkcell Holding.

The violation occurred in connection with a transfer of Cukurova Holding's shares in Turkcell Holding to Cukurova Telecom Holdings, a joint venture formed in 2005 between the Turkish Cukurova Group and the Russian Alfa Group. The arbitration tribunal in Vienna has ordered Cukurova Holding to take all measures available to it, including good faith negotiations with Alfa, to repurchase the transferred shares. The arbitration tribunal has reserved its rights to decide about other claims brought by TeliaSonera, including damages.

Turkcell Holding owns 51 percent of the shares in Turkcell, the largest mobile operator in Turkey. TeliaSonera owns 47 percent of the shares in Turkcell Holding. TeliaSonera also owns 13 percent of the shares in Turkcell, giving TeliaSonera a direct and indirect ownership of 37 percent in Turkcell.

Cukurova had in a counterclaim argued that the merger between Telia and Sonera in 2002 violated the share transfer restrictions in the shareholders' agreement, but Cukurova's counterclaim was dismissed by the arbitration tribunal.

The award results from an arbitration proceeding in Vienna that TeliaSonera commenced in August 2005.

In January 2007, another arbitration tribunal of the International Chamber of Commerce issued an award finding that a binding share purchase agreement was concluded between TeliaSonera and Cukurova in 2005, calling for Cukurova to sell all its shares in Turkcell Holding to TeliaSonera. The award results from an arbitration proceeding in Geneva that TeliaSonera commenced in May 2005 against Cukurova, after Cukurova withdrew from the transaction and entered into another transaction with Alfa.

TeliaSonera says that it hopes to execute the transaction with Cukurova but, even if the share purchase agreement is binding and Cukurova acted in violation of the Turkcell Holding shareholders' agreement, Cukurova may not be able, or willing, to proceed with the transfer of the Turkcell Holding shares to TeliaSonera.

Posted to the site on 7th March 2008