Megafon and Turkcell to Be Merged into Single Holding Company

­There is to be further tidying up of the often complex Russian-Nordic telecoms investments, after TeliaSonera and Altimo agreed to merge their respective direct and indirect interests in Turkcell and Megafon, into a new company. The new company will be established in a western jurisdiction and listed on the New York Stock Exchange.

The decision also settles the long running legal dispute between the two companies over Çukurova Group's sale of its shares in Turkcell.

The aim is to create an international operator, with over 90 million subscribers in Russia, Turkey and the CIS countries, and with well functioning corporate governance. The new company will focus on developing Turkcell and MegaFon as well as expanding into new emerging markets.

Once established, the new company will own a majority of the shares in both Turkcell and Megafon.

AF Telecom, the third major shareholder in Megafon, is also invited to join the partnership. Provided AF Telecom joins, TeliaSonera and the Russian investors will have substantially similar ownership and equal influence over the new company.

None of the major shareholders will have the possibility to acquire control over the new company other than by consent of the other major shareholders. The board will include independent board members, who will be able to resolve any deadlocks, if board members nominated by one of the major shareholders have a different opinion from the board members nominated by the other major shareholders. The chairman of the new company will be elected among the independent board members. Both Turkcell and Megafon will continue to operate as separate companies, retaining their own brands and marketing strategies.

TeliaSonera and Altimo have agreed to collaborate and align their efforts to resolve all ongoing legal disputes between each of them and Çukurova Group to make the establishment of the new company possible. Such collaboration is expected to result in a speedy resolution of the disputes.

Subject to their satisfactory resolution, the parties have agreed that Altimo acquires Çukurova Group's indirect shareholding in Turkcell and contributes those shares to the new company without any premium.

Lars Nyberg, President and CEO of TeliaSonera, said "I am very pleased that we have reached an agreement with Altimo to combine our efforts in resolving the legal disputes, which have been going on far too long. But the real value of the agreement is in the execution of it. The shareholder structure and control of Turkcell and Megafon will improve, as well as the liquidity of these assets. We have focused on creating a governance structure where all major parties will have good possibilities to influence, without single-handedly controlling, the management of the new telecommunications group. There is also very little risk of disruptive deadlock situations. It may take some time before we reach the end result, but the new listed company will have exciting future prospects and add value to our shareholders".

The ownership of Turkcell has been subject to several legal disputes since the former controlling shareholder, Çukurova, effectively sold the same shareholding interest twice, first to TeliaSonera and then to Altimo.

TeliaSonera has received a ruling from an arbitration tribunal of the International Chamber of Commerce in Geneva, stating that the share purchase agreement is valid and that Çukurova shall deliver its indirect controlling shareholding interest in Turkcell to TeliaSonera.

Subsequent to agreeing to sell such shareholding interest to TeliaSonera, Çukurova sold a portion of its indirect controlling interest in Turkcell to Altimo and pledged a further indirect controlling interest in Turkcell in exchange of a loan, which Altimo claims Çukurova later defaulted on. As a result, Altimo has claimed in legal proceedings in the British Virgin Islands that they have validly appropriated such indirect controlling shareholding interest in Turkcell, due to the default by Çukurova.

Fintur Holdings is a joint venture between TeliaSonera and Turkcell, in which TeliaSonera owns 58.55 percent and Turkcell 41.45 percent. Fintur is the major shareholder of leading mobile operations in Kazakhstan, Azerbaijan, Georgia and Moldava.

Posted to the site on 12th November 2009