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Shares in Turkey’s largest mobile telecom Turkcell rallied 5.28% on March 25 on the news that the operator’s shareholders had agreed to distribute dividends of TRY3.93bn (€1.38bn) in the first payout in five years.

The general assembly meeting of Turkcell will be held on March 26, and the proposal is expected to be approved, shareholder TeliaSonera said in a statement on March 25. Turkcell has not adopted any resolution at a shareholders' meeting since April 2010, when a resolution was passed on the distribution of dividends for the fiscal year 2009. The latest distribution proposal represents dividends for the fiscal years 2010 to 2014 and corresponds to around 42.5% of the net profit accumulated during the period.

Under a complex shareholding structure, Russian oligarch Mikhail Fridman’s Alfa Group holds a 13.2% stake in Turkcell, Turkish billionaire Mehmet Emin Karamehmet’s Cukurova Holding controls 13.8% and Sweden’s TeliaSonera has 38% while 35.88% of the company’s shares are traded on the Istanbul Stock Exchange.

Fridman has been locked in a battle with Karamehmet over the control of Turkcell, which has prevented shareholders of the company from being able to convene a general shareholders' meeting to discuss dividend distributions.

The agreement on a dividend payment is not expected to break the deadlock. The agreement does not cover all areas of the almost decade-long conflict between the shareholders, a person with direct knowledge of the matter told Bloomberg.

“This dividend request is a small first positive step to the improvement of matters at Turkcell but it does not resolve the deadlock. Our hope is that through our offer to purchase shares, this can be resolved quickly and that foreign investors in Turkish companies will be welcomed by the Turkish government,” Alfa Group said in a statement.

On March 17, Alfa Telecom Turkey, the Turkish subsidiary of Alfa Group, offered $2.8bn to buy a controlling 13.76% stake in Turkcell from cash-strapped Cukurova. Analysts, however, do not expect regulatory authorities to approve Alfa’s offer because Turkey does not want Turkcell to fall into the hands of a foreign company for strategic and national security reasons.

“It seems that shareholders wanted to act upon the Capital Markets Board’s (CMB) March 30th deadline for an AGM, as CMB intervention will be unnecessary in case of approval of agenda items on March 26,” said Oyak Investment in a note. In 2003, following the deadlock between the shareholders, the CMB appointed three independent members - of whom the two are former ministers of the ruling AKP and a former senior bureaucrat - to Turkcell’s seven-member board.

“The joint agreement of three shareholders on the dividend amount increases the probability of an AGM approval on March 26," Reuters quoted an analyst at TEB Investment as saying in a note to clients. TEB deems the news very positive for Turkcell, added the brokerage house. Even though the announced 43% dividend payout is below Turkcell’s target of 50%, this is still positive for the company’s shares as the statement removes uncertainties over dividend payments, said another brokerage firm Deniz Investment.

“Fundamental headwinds for Turkcell, including expected spending on a government auction in May for network licenses, could curb the short-term enthusiasm over the payout,” commented an analyst at Deutsche Bank research in Istanbul in an e-mailed note, cited by Bloomberg. The government hopes to complete a tender for fourth-generation (4G) mobile data services in May and be able to offer the service to consumers by the end of this year.

On a related note, Turkcell on March 25 named Kaan Terzioglu as its new chief executive effective from April 1, replacing Surreyya Ciliv who resigned in January. Terzioglu previously worked for Arthur Andersen Turkey, and later at Cisco Systems Brussels. He is also a member of the board of directors at insurer Aksigorta, consumer electronics retailer Teknosa, and supermarket chain Carrefoursa.

For 2015, Turkcell anticipates continued growth on a consolidated basis, mainly through its mobile broadband and fibre broadband businesses. It targets consolidated revenues in the range of TRY12.8bn – TRY13.1bn and consolidated EBITDA in the range of TRY3.85bn – TRY4.05bn. In accordance with its growth plans, Turkcell expects an operational capex to sales ratio of around 20%, with increased investments in preparation of the mobile network to 4G transition, further expansion of the fibre network, and the roll out of Astelit’s 3G network in Ukraine. The mobile operator reported that the number of total subscribers fell by 1.7% to 34.6mn in 2014, with post-paid subscribers rising 8.6% to 15.2mn and pre-paid subscribers declining 8.5% to 19.4mn.