Turkish Network Update on Interconnection Row

Turkcell has announced an update on it's claims regarding the interconnection fee structure contained in the Interconnection Agreement signed between Turkcell and Turk Telekom on April 24, 1998. In November 2000, Turk Telekom demanded that Turkcell shared all interconnection fees equally with Turk Telekom going forward and retrospectively from April 1998 as a result of the favorable decision obtained by the Turkish Electrical Engineer's Society in their lawsuit against Turk Telekom filed with the Ankara Ninth Administrative Court in October 2000, which claimed that the interconnection fee regime set out in the Interconnection Agreement between Turkcell and Turk Telekom violated public policy. Although Turkcell was not a party to this lawsuit, the Ankara Ninth Administrative Court annulled the interconnection fee structure set out in the Interconnection Agreement between Turkcell and Turk Telekom. Turkcell obtained an injunction from the Ankara Seventh Commercial Court with respect to Turk Telekom's request ensuring monthly payments until Turkcell reached an agreement with Turk Telekom to replace the annulled interconnection fee structure.

Turkcell has now been informed by Turk Telekom that this injunction was lifted and Turk Telekom will calculate the sharing of its interconnection revenue with Turkcell on an equal basis. Accordingly, Turk Telekom informed Turkcell that it will not make the monthly interconnection payment due in June 2003, of approx. US$58 million as it offset the amount against its receivables from Turkcell according to its claim that interconnection revenues should be shared equally. Although Turk Telekom's method of calculation is currently not known by Turkcell, Turk Telekom verbally informed Turkcell that the action is taken for the period beginning in September 2002 which is not the subject matter of the ongoing lawsuits.

Turkcell is currently unable to assess the full financial impact of this development. However, Turkcell has already applied to obtain another injunction to stop Turk Telekom's recent action and it will continue to take necessary legal steps against Turk Telecom.

There are two pending lawsuits filed by Turkcell against Turk Telekom in the Turkish Commercial Courts.

Additionally, Turkcell is currently engaged in negotiations with Turk Telekom to reach a consent on the new Interconnection Agreement which should be renewed according to the Access and Interconnection Regulation introduced recently. The new regulation directs that the interconnection tariffs should be based on the cost bases of the signing parties."

Posted to the site on 4th July 2003