Updated April 25, 2008

   Russian holding Altimo has had an opportunity to consolidate 27,02% stocks of the largest Turkish mobile company Turkcell. On April, 22 the appellate court of the Eastern Caribbean islands (ECI) decided Altimo had all grounds to claim them from Cukurova Group. Cukurova is ready to contest the court decision. But in lawyers’ opinion, it has no chances.

   On April, 22 ECI appellate court has rendered Altimo has all grounds to claim 51% of Cukurova Telecom Holdings (CTH) from Cukurova Group, and that equals 13,8% of Turkcell. These stocks were as security for the 6-year $1,7 billion loan, which Alfa Group had given Cukurova in November, 2005. Then the Russian holding has purchased 49% stocks of CTH from the Turkish corporation for $1,593 billion receiving the indirect control over 13,22% stocks of Turkcell. "Now the court considers the numerous agreement violations concerning the loan made by Cukurova", is said in the Altimo report.

ECI court representative confirmed the proceedings had taken place on April, 22, but refused to comment further.

   In November, 2006 Cukurova paid Alfa Group $357 million, the loan part. But Cukurova has taken the $1,5 billion loan at JP Morgan bank to pay the debt off. Then Altimo declared that according to the agreement Cukurova had no right to attract the new borrowings from outside investors, and in April, 2007 appealed to the ECI court. In its case the Russian holding demanded to admit Cukurova as having violated the loan agreement and insisted on receiving 51% of CTH mortgage stocks (equals 13,8% of Turkcell). Altimo could consolidate 100% of CHT (27,02% of Turkcell) after it had received this interest. The court admitted Altimo right for this interest, but considered it impossible to implement the demand as Cukurova refused to register Altimo as the company stockholder. Whereupon, Altimo has appealed to the ECI court.

   "We are pleased with the court decision and will continue to assert our rights to Turkcell stake at issue", says Altimo top vice-president Kirill Babaev. According to Altimo source, now the ECI court has to find out whether Cukurova has indeed violated the loan agreement. Next court proceedings take place in two-three months. "Cukurova has the right to appeal the ECI court decision to the U.K. High Court, and we will exercise this right immediately", is reported in the official Cukurova Group statement posted at the Istambul stock exchange.

   AntantaPioglobal analyst Anna Krylova marks such events result has been predetermined since Altimo has declared the transaction structure for CTH stocks purchase. "It was clear from the very beginning Cukurova could not return facilities it had borrowed from Alfa Group under the stocks security. The transaction was deliberately structured so to avoid TeliaSonera claims, which claimed for 27% Turkcell stocks. Altimo has indirectly received 13,2% CHT stocks, and another part has been "booked" under the loan security".

   In the lawyers’ opinion, Cukurova Group has minimum chances to return the Turkcell stockholding interest at issue. "As a rule, the structure of such transactions, under the security of which stocks are given, is very serious: letter of intent, which is hard to break, as well as insurance agreements with banks, is signed", says the partner of Jus Aureum law firm Alexander Zheleznikov. "It is highly probable Altimo proceeds to the end, as the powerful lawyers of the Russian holding are concentrated exactly in this area – as they exactly were at law with IPOC holding for the right to own 25% plus one stock of MegaFon".

   UBS analyst Stanislas Yudin reminds Altimo increases its stake in CTH to 100%, and it means the 53% ownership of Turkcell Holding company, which controls 51% of Turkcell. "One can not say Altimo will possess the economic control, but it will not predetermine the decision making of the Turkish operator", an analyst says. He reminds that Altimo final aim is control receipt in Turkcell.