Saudi Telecom Woos Turk Telekom Shareholders

Saudi Telecom reportedly is the frontrunner to buy 55% of fixed-line operator Turk Telekom, a European operator pushing the envelope of next-generation network access and undersea fiber optic cable.

The Saudi operator would acquire the majority stake currently owned by Oger Telecom, which currently faces creditor pressure after it missed debt repayments of $290 million in September and March on a loan of $4.75 billion.

Although other Gulf companies have expressed interest in taking over Oger's shares, only Saudi Telecom has entered negotiations, Reuters reported. If Saudi Telecom does not move ahead, two sources told Reuters the Turkish government may consider using a public institution to acquire a holding in Turk Telecom.

Today, the Turkish government owns 30% of Turk Telekom; ensuring its stability and longevity is crucial to the nation's leadership, a source told Reuters.

"Public institutions would intervene when needed and this option is still a matter of consideration," the individual told the news agency.

Turk Telekom's future ownership is of interest not only in Turkey but elsewhere, since the service provider operates in about 40 countries.

Tech synergies
Both operators are on the leading edge of fiber and next-generation access adoption.

Last year, Turkish Telekom's fiber optic network spans 228,000 kilometers (about 142,000 miles), reaching 13.9 million households, according to the operator's 2016 annual report. Today, it boasts 241,000 km of fiber infrastructure (approximately 150,000 miles); serves 39.6 million subscribers; can deliver broadband services to 98% of the nation's houses and reaches almost 60% of Turkish households via 15 million home passes, according to the operator. Turkish Telekom deployed NG-PON2 technologies from Nokia to deliver symmetric 40 Gbp/s service to a growing number of residential and commercial customers.

For its part, Saudi Telecom signed an agreement with the country's government to use fiber optic as part of a high-speed broadband network for more than 2 million homes, said Khaled Biyari, Saudi Telecom Group CEO in the service provider's second-quarter earnings release in July.

"Also, STC will continue to invest in promising technologies and digital sectors, particularly in areas that enable the company to benefit from their assets and infrastructure and help enable growth and expansion of investments in different areas, and the latest company announcement establishing $500 million venture capital fund (STV) to strengthen this trend," he added.

Oger took out the loan in 2013 as part of its debt refinancing, but repayment became a challenge as the Turkish lira's value sank over security and political concerns. The dollar's worth increased about 86% against the lira, thereby almost doubling the debt's cost in local currency, Reuters wrote.

Turkey's government has final authority over the sale, but Oger's approximately 30 creditors have input since they pledged the shares as collateral for the original loan.

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— Alison Diana, Editor, UBB2020. Follow us on Twitter @UBB2020 or @alisoncdiana.