World Telecom Industry is restructuring still. One side is the markets which are experiencing deregulations and on the other side, especially in our region, some new privatizations. However, mobile technological developments are driving the sector to a different direction which we are still trying to understand.
From Turkey’s perspective, 2005 was the year of telecommunication. First, the news regarding to Turkcell Sonera and Alpha, then Turkish Telecom privatizations and at the end of the year the sale of Telsim. Throughout the year, we held our breath and tried to understand what was happening or would privatizations be implemented and how much would these companies be sold for!
Sure, to talk about what will be happen in extension of those sales, is early. Still we couldn’t see a positive effect of the sales on the market. We can even say that the market is going to through another disappointment.
However, the privatizations and licensing of the new companies in the regions are continuing to grow. Egypt’s third bidding for the mobile phone services is on its way, Turkey’s 3G licenses will be given this year. So, latest bidding in the area, Tunisian license bidding is also getting attentions. We asked Mr.Husam Bodeur, General Manager of Calik Telecom, to compare the Tunisian bidding to the Turkish Telecom Privatization.
Calik Telecom is the winner of Albtelecom (Albania) bidding and one of the bidders for the Turkish Telecom Privatization. Calik Group is already one of the biggest corporations in Turkey with their investments in several areas such as textiles and energy. Mr. Bodeur said about Tunisian Telecom bidding process that;
I think Tunisians were more successful in sale of Tunisia Telecom in both their privatization method and their criteria for prequalification. Because they had the confidence in upside potential of the company, they only offered 35 percent of the shares for sale together with the management control. Investors mostly price their management rights. In a way, there is not much difference between 35 percent stake in Tunisia and 55 percent in Turkey. However, by selling management rights with only 35 percent stake for the time being, Tunisians are getting the value of the future as if they are selling a majority stake. Plus they ensure further increase of the value by handing over management decisions to a qualified strategic partner in order to get more money through the sale of remaining 65 percent stake in the future.
Tunisians determined their privatization method in a way that allows only those bidders within 10 percent of the leading bid in the first round to go to the final round. This leaves no room for plans outside due diligence results or competition analysis. As a result, the top bidder and those within 10 percent of the highest bid will now submit their final bids.
I believe a top bid for 1.9 billion dollars is quite reasonable. Tunisia has a population of 10 to 11 million and Tunisia Telecom has only 3.5 million subscribers. The population under age 15 is over 3 million, who are potential subscribers within two to three years. More importantly, Tunisia Telecom has also a market share of 70% in mobile sector. It is like the combined dominance of TurkTelekom and Turkcell in the same package. Tunisia covers an area of 150,000 km2 with only one-third inhabited. This relates to low investment cost for upgrades. Possibly that is why the EBITDA is well over 60 percent.. An EBITDA of 30 percent is a good number in Turkey. 60 percent in Tunisia Telecom corresponds to 520 to 540 million dollars according to 2004 statements. If we assume 5 to 10 percent growth in 2005, that means the highest offer is about 8 to 10 times EBITDA. I think that is quite fair for an operator with such dominant position and upside potential.
France Telecom had an internal moratorium for new acquisitions until they improved their balance sheet for the last few years following the collapse of global telecoms bubble. Last year, Telsim was the first buy opportunity they faced as they achieved the necessary improvements in their acounts. But Telsim turned out to be too big for a first buy after a long break and only a minimal recovery in financials. They tried to capitalize on their operator identity with a minority stake but the unreasonably high equity limit put by SDIF in Telsim sale allowed only Sabancı Group to be in the driver seat against all foreign operators. Yet it didn’t work between the two. Therefore, Tunisia Telecom is the first serious and doable or, better yet, a must-do deal for France Telecom. One should note that French companies have cultural, political and economic sinergies with Tunisia. Tecom, too, has a big appetite but no presence in the region, or in their home turf, Dubai, for that matter. So they would want to score here as well. It will be a tough competition.
By that chance we asked a few more questions to Mr.Bodeur;
turk-internet.com : Çalık Telecom is participating in the telecom privatizations. What is your strategy or goal in that respect and which specific privatizations are you attending to?
Husam Bodeur : Our goal is a strong regional presence by 2010, with an operational base in Turkey. We would want that operational base be Turk Telekom but we failed against Saudi Oger in its privatization. However, this doesn’t stop us from achieving our goal. It will only be more exciting.
We are interested in an immediate region from the Adriatic coast to the Chinese Wall. Only after achieving that, no one would question us when, not if, we develop projects in Far East, Europe, or North America, against global brandnames.
turk-internet.com : What is your key points in making a partnership?
Husam Bodeur : Couple things but I think the first one is chemistry.. We must feel comfortable with our partner when it comes to transparency, integrity, and vision. That was how when we teamed up with Etisalat in TurkTelekom case. We were like a family throughout the ordeal. Once we pass this fırst step, we look for win-win solutions for a long run.
turk-internet.com : You were not participant in Telsim bidding.. Why ?
Husam Bodeur : As I have explained before, the equity limit of 500 million dollars set by the SDIF to participate in Telsim sale was too high for all local investors except one or two. No Turkish bidder except for Sabancı as far as I know was able to be in the driver seat during negotiations with foreign partners and financial institutes. That is a huge setback if you need to establish a chemistry followed by a win-win solution without equal footing. We were approached by almost all foreign operators but we did not feel comfortable with the terms dictated on us as the partner in the back seat.
To reach Turkish version of that interview, Please click here.
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