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June 1, 2006 6:51 pm

Vodafone puts $1.2bn into Telsim

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Foreign investors on Thursday completed two large takeovers in Turkey as the wave of mergers and acquisitions continued in spite of jittery financial markets.

Vodafone, the world’s largest mobile telecoms operator, completed the purchase of Telsim, Turkey’s number two operator, a deal announced late last year. The UK company said on Thursday it would invest $1.2bn in the network over the next two years to compensate for underinvestment by previous owners. Telsim trails a distant second to Turkcell in the fast-growing Turkish mobile market.

Separately, Texas Pacific Group, the US private equity firm, closed a deal announced in April to buy 90 per cent of Mey, a maker of alcoholic drinks. The transaction values the Turkish company at $900m. The acquisition was the first significant private equity deal in Turkey.

The closing of the two deals follows this week’s acquisition of Denizbank, a private bank, by the Franco-Belgian Dexia group. It was the latest in a series of deals in the Turkish banking sector since the beginning of the year as European banking heavyweights scramble for a foothold in Europe’s fastest-growing economy.

Foreign banks and other purchasers have announced deals worth $8.3bn in the Turkish financial services sector this year, according to data from Thomson Financial. Mehmet Sami, an investment banker at Ata Invest in Istanbul, said that, of $35bn worth of Turkish M&A activity in 2005, $20bn was foreign acquisitions of Turkish assets, making it the best ever year for foreign direct investment flows into Turkey.

Turkey’s M&A boom coincides with a negative turn in sentiment towards emerging markets by portfolio investors in recent weeks.

The Turkish lira has tumbled about 20 per cent against the euro and the US dollar, dragging stocks down and pushing up bond yields. Mr Sami said there was “a disconnect” between the sell-off by portfolio investors and inflows from strategic investors.

“Short-term investors are taking profits, and long-term FDI (Foreign Direct Investment) investors are continuing to pay quite big premiums for opportunities in Turkey,” Mr Sami said.

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