The Uzan family's 219 companies were seized after the authorities alleged they owed $5.5 billion to the state.

 

This followed last September's seizing of the Uzans' main bank, Imar, which Turkish financial authorities estimated had debts of $6 billion and represented a major threat to the stability of the whole banking system.

 

"The debt of the Uzan family is so large," Istanbul-based telecoms analyst Guven Aksu told Aljazeera.net, "if the state were now to sell off all 219 companies, it still wouldn't get anywhere close to the money these companies owe."

 

This has left the government with a major problem. Central in this has been the case of the Uzan's GSM mobile phone network, Telsim, which is now in the hands of government receivers.

 

With the company claiming about 5.5 million subscribers, Telsim is Turkey's second largest network. First is Turkcell, with some 20 million users.

 

"The government would very much like to sell Telsim to offset the debts of the other Uzan companies," says telecoms analyst Ayse Kanioz Moroz of Raymond James Securities in Istanbul.

 

"It's really the only major asset among the Uzan companies."

 

For sale

 

It is also one that has drawn much international interest. China Mobile, the UK's Vodafone Group and Spain's Telefonica have all been rumoured as interested parties.

 

Telsim is Turkey's 2nd largest
phone company with 5.5 million
subscribers

A major domestic challenge is also likely from an alliance of two of Turkey's largest conglomerates, Koc and Sabanci, which are talking of a joint interest in Telsim.

 

But despite its subscriber base and established network, Telsim may not be the bargain many are looking for.

 

For a start, the company has massive debts.

 

One of the first signs that the Uzans' empire was unravelling was when a New York court awarded mobile giants Motorola and Nokia $4.2 billion in damages in 2002 against Telsim.

 

Court case

 

This was due to allegations that Telsim had broken a vendor licensing agreement with the two phone giants. The court also found the Uzans guilty of watering down Motorola and Nokia's shares in Telsim, along with several other counts of fraud.

 

The company also owes the state money for connection charges using the state landline operator, Turk Telekom (TT).

 

It therefore seems unlikely that anyone will want to buy Telsim until this debt position is clarified.

 

"Telsim's rival, Turkcell, is valued at around $5 billion," calculates Kanioz Moroz.

 

"With 20 million subscribers, that works out at about $250 a subscriber. Apply that to Telsim and you get a company evaluation of around $1.25 billion.

 

"Compare that to its debts and you quickly realise there has to be an agreement with Motorola and Nokia over how much of a haircut they are prepared to take if anyone's going to buy Telsim," he said.

 

Legal restraints

 

Meanwhile, the current Turkish telecoms laws are also potential dampeners on any investor enthusiasm.

 

"Few foreign companies will want to be involved without a controlling interest – particularly given this company's track record"

Guven Aksu,
telecoms analyst

"Currently, there's a law that at least 51% of any telecoms company has to be Turkish owned," adds Aksu.

 

"Few foreign companies will want to be involved without a controlling interest – particularly given this company's track record."

 

Selling Telsim also affects another major government initiative in the telecoms sector – the privatisation of TT.

 

Successive Turkish administrations have been unable to sell this giant operation, which until recently enjoyed a fixed line monopoly. It also comes with its own GSM mobile company, Aria-Aycell.

 

Market

 

Now though, international lenders such as the International Monetary Fund are pressuring Turkey to sell it as part of the economic programme the country has been running since the February 2001 financial crisis.

 

IMF is pressuring the Turkish
government to privatise industries

"Turk Telekom is the real jewel in the crown," adds Aksu. "Selling it will restore much confidence in the government's privatisation programme. Therefore, selling TT will always take precedence over selling Telsim."

 

But this may knock out potential buyers for Telsim. The Koc-Sabanci joint venture, for example, is also rumoured to be in the market to buy TT.

 

"Koc and Sabanci would most likely prefer to push ahead with TT," says Kanioz Moroz.

 

"But TT is itself a moving target. There are some seven potential bidders for it, which is not a lot, plus they're mostly the usual suspects – ones that unsuccessfully bid before.

 

"We think some of them are not really solid bidders. A lot of what happens next is going to depend a great deal on lobbying at the government level. If a deal can be done over Telsim's debts and legal position, maybe priorities will change."

 

Uncertainties

 

Currently, the government is trying to appoint a commission to examine the legal aspects of selling Telsim.

 

"At the moment, the priority problem is clear," Omer Arasil, the head of the state telecommunications board, told reporters earlier this month. "The priority is to clear up all the legal uncertainty."

 

Cem Uzan has a life in politics
as well as business

A new telecommunications law has been drafted and the government is pushing hard to get it through parliament. This will remove the 51% rule – for both Telsim and TT.

 

Meanwhile, the Uzan family members remain largely on the run or in limbo, with a host of other court cases and counter cases surrounding them. Any move to sell Telsim is likely to be met by a court challenge from the family, which still exerts a powerful hold on many in Turkey’s financial and political community.

 

"The more we begin to know about these people," says Aksu, "the more it becomes clear how they were involved in every kind of business malpractice imaginable. How they got this far is quite a question in itself."