Sureyya Ciliv: I still cannot accept this

Turkcell Plans Purchases as Growth Outpaces Vodafone

Turkcell Iletisim Hizmetleri AS, Turkey's biggest mobile-phone company, plans to make international acquisitions this year after defending its home market against Vodafone Group Plc, Chief Executive Officer Sureyya Ciliv said. The shares gained the most in five years.

``I'll be surprised if we don't make some acquisitions in 2008,'' Ciliv, 49, said in an interview at Turkcell's Istanbul headquarters. ``Maybe we're getting lucky: credit markets are tightening up and Turkcell is sitting on a lot of cash.''

Turkcell shares rose 13 percent, the most since November 2002. The stock has jumped 67 percent, more than four times the gain on Turkey's main index, since Ciliv took over in January 2007. Turkcell had a record $401.2 million third-quarter profit and added 3.5 million users in the year through September. The growth outpaces that of London-based Vodafone, which spent $4.55 billion on Turkey's second-biggest mobile-phone company in 2006.

``I can't remember the last time I was so wrong,'' said Osman Memisoglu, an analyst at Finans Invest in Istanbul. In May, Memisoglu rated the stock ``underperform'' with a 12-month price target of 8 liras, a target he has raised twice to 10.30 liras now, equal to yesterday's closing price. ``Turkcell performed incredibly well last year. We all thought the shares would dive as competitors advertised aggressively and cut prices.''

Turkcell shares, which peaked at 13.90 liras on Dec. 6, closed at 11.60 liras today. A record $129 million-worth of the shares changed hands today, Bloomberg data shows.

`New Impetus'

``The prospect of acquisitions this year has given a new impetus to the shares,'' said Stuart Hackett, a trader at Ekspres Invest in Istanbul.

Turkcell said in December that it's bidding for a majority stake in Syrian cellular provider Syriatel Mobile Telecom. Turkcell sees ``a lot of potential for growth'' in Syria, where only about 25 percent of the population uses mobile phones, and is talking to potential partners there, Ciliv said.

The company is also considering investments in other countries, Ciliv said, without naming them. In the past three years, Turkcell lost auctions for cellular units in Saudi Arabia, Greece and Kuwait, and its bid to start a network in Iran was blocked by the Islamic republic's government.

Turkcell and TeliaSonera AB have a joint venture in Azerbaijan, and agreed to spend $180 million to buy the shares in that unit that they don't already own from the Azeri government, Dunya newspaper reported today.

Number Portability

Turkcell may face a new regulation this year that will require phone companies to let customers keep their numbers when they switch operators, or so-called number portability.

Vodafone and Avea Iletisim Hizmetleri AS, the country's No. 3 mobile-phone operator, say number portability will increase competition. Turkcell may lose 15 percent of its customers as a result, Avea CEO Cuneyt Turktan told reporters last month. Avea is controlled by Saudi Arabia's Saudi Oger Ltd.

Ciliv says Turkcell's wider geographic coverage and faster data services will keep customers loyal. The country has 61 million mobile-phone users.

Voice calls make up about 85 percent of Turkcell's revenue, and that may drop to as little as 50 percent once Turkey starts third-generation high-speed wireless services, Ciliv said. Turkey canceled a September auction for 3G services when Vodafone and Avea boycotted it, leaving Turkcell as the sole bidder. It's not clear when the auction will be held.

``I still cannot accept this,'' Ciliv said. ``Egypt has 3G, Russia has 3G, Georgia has 3G, Uganda has 3G, so why do our competition think it's too early for Turkey?''

Legal Tussle

Another obstacle for Ciliv is the struggle among Turkcell's main shareholders. Turkey's Cukurova Group, Sweden's TeliaSonera AB and Russia's Alfa Group control a combined 68 percent of Turkcell. Each has filed lawsuits against the others disputing their rights over the company.

``It makes it a bit more difficult, but it's manageable,'' Ciliv said.

Ciliv, the former head of Microsoft Corp.'s Turkish unit, says he warned the world's biggest software maker against buying a stake in Turkcell around the time of its initial offering in July 2000. The IPO valued the company at $17 billion and Ciliv said he told his bosses it was overvalued.

Turkcell shares fell 85 percent by September 2001, and only returned to their IPO value in October 2004. It's currently the nation's most valuable company with a market value of about $21 billion.

Ciliv, who also headed Microsoft's 30,000-strong global sales team, says he wants Turkcell to be a software developer too. He cites programs allowing Turkcell clients to get money from automatic teller machines without cards and to exchange so- called secure electronic signatures by phone.

``The fact that I come from Microsoft is an asset,'' Ciliv said. ``I know that part of the computing world, and I worked very hard last year to learn the telecom business as well.''