Mobile players to join forces

14 May 2003

Turk Telekom and Telecom Italia Mobile (TIM) [London: TIMq.L] have agreed to merge their Turkish cellular operations in a move which will ultimately resolve the latter’s protracted argument with the Turkish telecoms regulator. Under the proposed deal, TIM’s local subsidiary IsTIM will join forces with Turk Telekom’s mobile arm Aycell in a bid to become the second largest mobile operator in Turkey behind Turkcell; that accolade is currently held by Telsim, owned by the Rumeli Group. TIM and Turk Telekom will each own 40% of the new company, with he remainder belonging to Turkey’s IsBank, TIM’s partner in IsTIM.

TIM has been embroiled in a dispute with the Turkish government over a number of regulatory issues and recently threatened to pull out of Turkey altogether unless conditions for foreign investors were improved. In particular it has been lobbying the regulator to implement new rules regarding roaming across mobile networks. IsTIM’s network, which trades under the banner Aria, covers only 50% of the population and the operator has claimed that the state has failed to ensure the nation’s remaining operators make roaming services available. IsTIM had also been threatening to launch a lawsuit against the government claiming USD3 billion in damages. Although precise details of the merger between Turk Telekom and IsTIM have yet to be released, the former has said it will inject substantial funds into the deal, in addition to bringing Aycell’s extensive infrastructure assets to the table.

At the end of 2002 Aycell claimed 600,000 subscribers, with Aria’s tally standing at 1.15 million. The new venture faces an uphill task in trying to win market share away from Turkcell and Telsim, which claimed 15.7 million and six million subscribers respectively at the end of 2002. Despite this, Turk Telekom and IsTIM remain confident of signing over 100,000 new customers a month, and with mobile penetration currently standing at approximately 30%, claim the market still has plenty of room for further growth.

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