FT: Investors concerned over public row

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"Turkish media group given $408m tax fine

By Delphine Strauss in Ankara

Turkey's biggest media group has once again fallen foul of the authorities, incurring a 693million TL ($408 million) tax fine at a time when its advertising revenues are set to weaken and its parent company wants to use its cash to expand in other sectors.

Dogan Yayin, which owns TV channels and some of Turkey's top-selling daily newspapers, yesterday disclosed the fine, which is bigger than its current market capitalisation. The group, which plans to appeal, said it had also been ordered to pay back taxes of 132.9mTL.

Shares fell 17.7 per cent on Istanbul's stock exchange yesterday, while shares in its parent, Dogan Holding, fell 14.1 per cent.

The penalty is the latest in a string of regulatory decisions against the media and energy conglomerate, controlled by billionaire Aydin Dogan.

Its subsidiary Petrol Ofisi, a fuel distributor in which Austria's OMV has a 34 per cent stake, faced a tax fine last year but made a deal to pay a reduced amount.

Investors worry that the group could be suffering from a public row between Mr Dogan and Recep Tayyip Erdogan, Turkey's prime minister, who last autumn called on his supporters to boycott Dogan publications due to coverage of a corruption scandal.

"This is normal for us. I'm not surprised," said Dr Ragip Nebil Ilseven, chief executive of Dogan Holding. But Salih Yendi, chief of the tax authority, told Bloomberg neither the fine nor the timing of the announcement was political.

The latest fine relates to profits Dogan Yayin made when it sold its 25 per cent stake in Dogan TV to the German publisher Axel Springer in late 2006 - a partnership it extended recently, with Axel Springer gaining a board seat and a stake in Dogan Yayin.

If the fine were enforced in full, Dogan Holding - which has net cash of about $1.1bn - may have to step in to help its more indebted subsidiary.

Sinan Goksen, analyst at Expres Invest, said that could hinder the group in other projects, including its plan to bid in a 50-50 joint venture with Italy's Lottomatica in the privatisation of Turkey's national lottery.

Toygun Onaran, analyst at KBC Financial Products, said that even if the fine were not exacted in full, "this is making the situation unclear, and in this unclear situation nobody wants that risk."

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