Fitch: Turkcell Faces Rating Pressure over Bulgaria Telco Bid

Business | March 8, 2012, Thursday // 09:10|  views

A file photo dated 08 December 2011 shows an exterior view of the offices of Fitch Ratings in New York, New York, USA. Photo by EPA/BGNES

Turkcell's binding offer to acquire a 94% stake in Bulgaria's Vivacom will pressure the company's rating, Fitch agency has warned.

The rating agency statement came shortly after Turkcell's Board of Directors decided to submit an offer to acquire a 93.99% stake in the Bulgarian telecom operator, Bulgarian Telecommunications Company Vivacom.

Turkcell Iletisim Hizmetleri, the biggest Turkish mobile-phone company, currently has a Long-term foreign currency and local currency Issuer Default Rating (IDR) of 'BBB-'.

The outlook is stable.

As the enterprise value for the Bulgarian telecom asset is expected to be in the range of USD 1 B – USD 1.4 B, if not higher, Fitch notes that "the cash outflow at the high end of this range related to such an acquisition would pressure the company's credit profile".

Fitch expects the company would fund the acquisition from its existing strong cash position and therefore cautions that it would have more limited financial flexibility to defend its leading position in the domestic mobile market.

The rating agency is also concerned about elevated competition and pressure on operating margins in Turkey, as well as political and regulatory pressure on the company.

Turkcell's board of directors decided this week to submit a bid for the acquisition of a 9­3.99% in the Bulgarian telecom operator Bulgarian Telecommunications Company (Vivacom).

The Turkish company will be the only strategic investor in the tender.

The amount of its bid was not disclosed.

Earlier reports said the Turkcell valued Vivacom at about USD 1.4 B, but the Turkish company described the potential bid amount in the media as "groundless".

Three binding bids have already been submitted for Bulgaria's telecom Vivacom, but their amounts are not known either.

Tsvetan Vassilev, the head of Bulgaria's Corporate Commercial Bank, and Icelandic businessman Thor Bjorgolfsson have made bids for Vivacom, heir to the state-owned Bulgarian Telecommunications Company (BTC), Capital daily reported last month, citing insiders.

The third bidder to meet the February 27 offer deadline was Pamplona Capital Management LLP, a London-based private equity firm, according to the newspaper.

Morgan Stanley is advising Vivacom's creditors to help sell the company, the people familiar with the matter said.

The heavily indebted Bulgarian operator is controlled by Chinese telecoms and media tycoon Richard Li.

He inherited control of Vivacom in March 2010 as part of the acquisition of AIG Investments, a unit of the troubled US insurance group which spans asset management and private equity investments.

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Tags: management, capital, Thor Bjorgolfsson, Oger Telecom, AIG, PCCW, BTC, Bulgarian Telecommunications Company, Richard Li, Vivacom, Telekom Austria, turkey, Turkcell, Corporate Commercial Bank, Tsvetan Vassilev, Mobiltel, OTE, Globul, Pamplona, Fitch


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