David O'Byrne in Istanbul -
A quick perusal of the corporate history of most major European corporations would indicate that at board level stability is the key: chairmen and board members may come and go, but change is generally an ordered affair. Which makes April 21's shareholder meeting at Europe's third biggest mobile phone operator Turkcell all the more unusual, with major shareholder Russia's Altimo announcing upfront that it wants to unseat Turkcell's chairman, Colin Williams.
Williams is already facing legal action from Turkcell's main shareholder Sweden's TeliaSonera, only one of a veritable snowstorm of suits that are the result of the best part of a decade of struggle for control of the highly successful mobile operator.
According to Mustafa Kiral, head of mergers at Altimo, the move comes after a year of dissatisfaction with the performance of Williams, who was initially appointed to the board as an independent, but was later promoted to chairman after the chairman Mehmet Karamehmet at the time received a jail sentence for fraud over business activities not related to Turkcell.
Karamehmet's Cukurova Holding controls Turkcell through a complex web of holding companies, despite only owning the equivalent of less than 14% of company stock - far less than the 37% controlled by main shareholder Sweden's TeliaSonera, the 33% free float and only equal to Altimo's holding. "Williams' background is in packaging not telecoms and he commutes from the UK for board meetings," says Kiral, complaining that this limited experience of the telecom business and distance from the company has hampered Turkcell's ability to continue growing now that Turkey's domestic mobile market is saturated.
"Turkcell should be expanding outside of Turkey, but Williams has not come up with a strategy for this," complains Kiral, pointing out that Turkcell is sitting on substantial cash reserves and failing to use them as an engine for growth. "We've seen the value of the company drop from between $17bn and $18bn down to between $13bn and $14bn."
In order to help Turkcell capitalise on its position, Altimo and TeliaSonera want to add two new independent members to the Turkcell board, raising the number of board members to nine - a move backed by Turkey's Capital Markets Board (SPK) and the Securities and Exchange Commission in the US, where Turkcell is also listed, but which has been opposed by Williams. "The board should be independent, and the chairman has no right to block a legitimate request from shareholders for an issue to be discussed.
That refusal by Williams to allow the issue of new independent board members to be discussed at Turkcell's AGM, has led TeliaSonera to open legal proceedings, claiming that Williams has abandoned his impartiality and is in breach of corporate law.
Too close to call
Whether or not this AGM will result in Williams's removal and the expansion of the Turkcell board remains to be seen. "We really don't know what to think - both sides have been accusing the other of all sorts of things, and it doesn't look as if the dispute can be resolved easily," a telecom analyst at an Istanbul brokerage tells bne on condition of anonymity, pointing to a flurry of accusations on top of the longstanding litigation.
Those accusations include allegations that it is TeliaSonera and Altimo that have blocked Turkcell's plans to expand into Africa and that TeliaSonera embezzled money from Turkcell's mobile subsidiary in Kazakhstan, Kcell - both of which are expected to be discussed in what promises to be an eventful meeting.
But whatever the result, ultimately the fate of Turkcell looks set to be decided not in Turkcell's mirror glass clad HQ in central Istanbul, but in courtrooms across Europe where TeliaSonera and Altimo are pursuing separate actions, either of which could end Cukurova and Karamehmet's control of the company.
These cases have already prompted some Turkish commentators to call for government intervention to keep the company in Turkish control - a move which would leave the government itself open to international criticism, but which may pay dividends in the Turkish general election scheduled for June 12.
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