TURKEY: Telecoms privatisation law approved

19 May 1995

A law providing for the privatisation of Turk Telekom, carved out of the giant Posts, Telegraphs & Telephones (PTT) administration, was published in the official gazette on 7 May after approval in parliament. A key part of the government's sweeping privatisation programme, the telecoms sale is expected to contribute much of the targeted $20,000 million in overall privatisation receipts in 1996 (see page 20).

The government's Privatisation Administration (OIB) is now expected to decide on whether a consultancy award will be made to prepare Turk Telecom for sale, or to focus only on the co-ordination of the sale. Foreign consortiums mainly of merchant banks have already expressed keen interest in the deal (MEED 16:12:94). Privatisation of services including pay phones, mobile phones and video-text could start as early as the autumn.

However, the new law takes into consideration reasons cited by the country's constitutional court for annulling previous legislation in 1994. Most notably it provides that only 34 per cent of a maximum 49 per cent to be divested will be sold to the market, the remaining 15 per cent to be reserved for the PTT, its employees and those of Turk, and small investors.

Continuing strong government control of Turk development policy may be a deterrent to foreign investors, particularly if a previous emphasis on lower revenue, rural as opposed to urban lines is maintained, say analysts. The government will also have to assure foreign investors that future tariff regimes will automatically be aligned with inflation, and not as in the recent past, suppressed for political reasons. Telecoms denationalisation must also compete globally with other countries' programmes, notably that of Deutsche Telecom in Germany.

Strong domestic political opposition remains towards telecoms privatisation as well, notably in the coalition government's own junior partner, the Republican Peoples Party. Once again there are moves to have the new legislation annulled by the constitutional court.

Nevertheless, say analysts, the telecoms sector is one of the most rapidly developing in the economy, with an additional 1.2 million lines planned annually up to 2000 from the 14.5 million lines at present. The sector has already witnessed the installation of around 10 million lines using advanced technology over the past decade.An area with large profit potential is expected to be the development of the Global standard for mobiles (GSM).

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