ISTANBUL - As full-page advertisements by the Privatization Administration calling on investors to buy Türk Telekom shares appeared in Turkish newspapers yesterday, daily Radikal criticized the approaching initial public offering (IPO), claiming the shares are being put on sale "dirt cheap."
The government aims to raise as much as $1.9 billion from the IPO for a 15-percent stake in Türk Telekom, the nation's fixed-line phone company.
Initial offers will be collected starting today through Wednesday, while final offers will be collected from May 7 through 9. Of the total shares, 65 percent will be sold to foreign investors and 35 percent to domestic investors.
Türk Telekom is then scheduled to begin trading on the Istanbul Stock Exchange (IMKB) May 15.
The shares will be offered for between YTL 3.9 ($3) and YTL 4.7 each, valuing the company at between YTL 13.5 billion and YTL 16.5 billion.
The stake may be increased to 17.2 percent, or a total of as much as $2.2 billion, to meet demand.
The sale in 2005:
The government, which is selling off state assets under a $10 billion International Monetary Fund loan agreement, sold 55 percent of Türk Telekom to Saudi Oger for $6.6 billion in 2005. The IPO, at the high end of the range, would value all of Türk Telekom at $12.7 billion, up from $11.9 billion at the time of the sale to Oger.
"This is an incredible price," Toygun Onaran, an analyst at EFG Istanbul Securities, told Bloomberg. "They probably had concerns about lack of demand from investors. The valuation of the company is very close to when Oger Telecom bought its stake three years ago."
Analysts from companies that will act as intermediates in the IPO say the offering during such a delicate international situation is "wrong," Radikal reported in its headline story yesterday. Emphasizing that the price is too cheap, the newspaper noted that Turkcell, a private telecommunications company, is worth YTL 23 billion.
Price/earnings ratio:
"According to the IPO price, Türk 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, Türk Telekom is being offered virtually for free," the newspaper said.
Comparing the two companies, Radikal said Turkcell, with a capital of YTL 2.2 billion, made a net profit of YTL 1.7 billion in 2007. Meanwhile, Türk Telekom, with a capital of YTL 3.5 billion, closed the same year with YTL 2.5 billion net profits.
Türk Telekom sales jumped 23 percent to YTL 9.2 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.
Türk Telekom's participating portfolio includes 81 percent of Avea, a rival of Turkcell, said Radikal.
"Either [the government] wants to make someone rich, or it is having a hard time in revenues," said analysts speaking to Radikal on condition of anonymity. "Turkey has been offsetting its high current account deficit with either direct foreign capital inflows or portfolio investments. But with the global crisis, abundant liquidity is no more, or more important than that, the cost of money has risen."