The government on 10 October agreed to consider proposals made by the Privatisation Administration (OIB) to increase the strategic stake on offer in Turk Telekom to 34 per cent and yield more management control.

The failure of the sale on 15 September to attract international investors has forced the government to rethink the terms of the deal, which is of critical importance to the whole privatisation programme.

The government initially offered a 20 per cent strategic stake with the remaining 14 per cent to be offered later in an initial public offering (IPO). The deadline for bids closed with no foreign investors coming forward.

The government then said it planned to increase the block sale on offer to 29 per cent and reserve 5 per cent for the IPO.

However, the OIB is urging the government to offer the entire 34 per cent stake, which is the current legal limit in the Turk Telekom privatisation. 'If you give only 29 per cent and minority management rights, again there will be no bids, ' says OIB's project group head Hasan Suel.

The OIB put its case at a 10 October meeting of the privatisation high council, after which State Minister Yuksel Yalova said a block sale of up to 34 per cent with more management rights was now under active consideration.

Investment bankers working on the deal say they remain confident that it will ultimately succeed. Given the internal demand in Turkey, this is still a lucrative project, says Ceyla Pazarbasioglu of ABN AMRO, which is working with Merrill Lynch as financial consultant for the sale.