With the financial crisis in full flow, the IMF delegation that swept into Ankara in late December to deliver an emergency rescue package had one very clear message for the Turkish government: Sell.
The Fund's US$7.5 billion lifeline was issued with a number of conditions. Uppermost amongst these was the privatisation of the country's state telecommunications giant, Turk Telekom.
"It has become a symbol of the winds of change in the Turkish economy," says Timucin Engin, telecom analyst with Ekinciler Securities. "The government must sell it off at almost any price."
The stakes on this privatisation are enormous. It has become a test case for the government's faithfulness to the IMF economic programme, a budget-cutting, belt tightening, exchange rate anchoring policy it has been following since late 1999. It is therefore also an important test for foreign investors, who will want to see it successfully concluded before returning in any numbers. It is also an important test case domestically, as it will stretch the resolve of the government in the face of determined opposition -- both from unions, former ministers and from within the ranks of the ruling three-party coalition.
Turk Telekom is the jewel in Turkey's privatisation crown. Valued at between US$8-10 billion, it has a number of attractive features, though its massive fixed line operations (it enjoys a monopoly in the country at present) are probably the least likely to be of interest to investors. Fixed line penetration in Turkey is only around 20 per cent but in terms of the total number of lines, the country has a much higher ranking. The fixed line network has shown a slowing down in growth too, with the present Turk Telekom monopoly set to end in 2003 when the Turkish telecommunications market becomes completely liberalised.
The real value of the company lies elsewhere. First of all in its possession of a GSM 1800 mobile phone operating licence. Then, in its digital network (the level of digitalisation at exchanges is now 85 per cent) which can be used for TV transmissions and is already behind cable networks in 20 Turkish cities. Finally, there is the fact that it owns and operates the country's two major internet providers, TURNET and TTnet.
Analysts seem agreed that these three factors are important advantages. "Low penetration rates in these businesses suggest a significant growth potential in the coming years," says a report by Garanti Securities, one of Turkey's leading...