Value of Turk Telekom IPO pricing still controversial

The initial public offering for the 15 percent stake of the nation's fixed-line operator,Turk Telekom for the 525 million new Turkish liras (YTL) ($410 million) par value Treasury held stocks has begun, said Kilci on Monday. He said the book building for the privatization will take place on April 28-30 and the final bid collection will be conducted on May 7-9 following to the approval of the Capital Markets Board of Turkey (SPK). The public offered shares is planned to be traded at Istanbul Stock Exchange (IMKB) on May 15 following to approval of IMKB's board.        

Kilci said that he should not be expected to comment over whether the telephone operator’s privatization value has been valued high or low.

The Privatization Administration said on Sunday a price range of 3.90 to 4.70 YTL ($3.04-3.67) has been set for an initial public offering of Turk Telekom, valuing the operator at up to 16.45 billion YTL ($12.9 billion). In first privatization process in 2005, when Dubai-based Oger Telecom paid $6.55 billion for a 55 percent stake, the company was valued at $11.91 billion.

Analysts from companies that will act as intermediates in the IPO say conducting an offering during such a delicate international economic situation is “wrong,” Radikal daily reported in its headline story on Sunday. Emphasizing that the price is too low, the newspaper noted that Turkcell, a private telecommunications company, is worth 23 billion YTL ($17.96 billion).

PRICE EARNING RATIOS

"According to the IPO price, Turk Telekom's price/earnings (P/E) ratio stands at 6.5. The average P/E at the stock exchange is at 8.5-9. Turkcell's P/E stands at 13.3 Thus, Turk Telekom is being offered virtually for free," the Radikal article reported.

Comparing the two companies, Radikal said Turkcell, with capital of 2.2 billion YTL ($1.71 billion), made a net profit of 1.7 billion YTL ($1.32 billion) in 2007. Meanwhile, Turk Telekom, with capital of 3.5 billion YTL ($2.73 billion), closed the same year with net profits of 2.5 billion YTL ($1.95 billion).

Turk Telekom sales jumped 23 percent to 9.2 billion YTL ($7.18 billion) in 2007. The company had 18.2 million fixed-line subscribers at the end of 2007, while its broadband Internet subscribers stood at 4.2 million.

Turk Telekom, which was partly privatized in 2005, is listing a 15 percent stake or 17.25 percent including an over-allotment option. The government is pressing ahead with the deal despite a 22 percent slide on the Istanbul's main stock index this year which has prompted several IPOs to be postponed.

At the top of the price range, the sale of a 15 percent stake would raise 2.47 billion YTL ($1.93 billion), well below revenues of 3.9 billion YTL ($3.04 billion) which the government had forecast in this year's budget.

The deal had been expected to be the Istanbul stock exchange's biggest offering but the price range indicates it could end up on a par with Halkbank's IPO last year, which was worth about 2.5 billion YTL ($1.95 billion.)

Turk Telekom, whose mobile business, Avea, is the third operator in the fast-growing Turkish market, had revenue of 9.2 billion YTL ($7.18 billion) last year and a net profit of 2.5 billion YTL ($1.95 billion.), according to a circular released by the Privatization Administration.

Sixty-five percent of the offering will be aimed at foreign institutional investors. Deutsche Bank and Garanti Securities, part of Garanti Bank, are advising on the offering.

Photo: AA