7 October 2011< Go back

Murat Vargı calls Board Members of Turkcell for resignation

Murat Vargı has sent his written request and opinion to Board Members of Turkcell stating that 7 Board Members to be composed of 3 representatives of the major shareholders and 4 independent members elected by the Capital Markets Board.

To the attention of Board Members of Turkcell,

I am writing this letter to you as one of the founding partners and one of the biggest shareholders of Turkcell in free float market since 2000.

With the latest developments, the pending conflict amongst shareholders of Turkcell has elevated to an extremely critical level. The two General Assembly meetings held within 2011 have not fulfilled its main aim such as signing off on the balance sheet and dividend distribution of Turkcell and resolving shareholder issues; rather, they have served as an arena for shareholders’ disputes and boardroom politics. The reflection of this deadlock to the press and to the outside world has affected Turkcell shares negatively, causing the market capitalization to fall below USD 10 billion. Turkcell shares have underperformed the Istanbul Stock Exchange 100 by 27% and the MSCI Emerging Markets Telecom Services Index by 20% year-to-date. Clearly, Turkcell’s dividend payment and market performance are not the current priorities on the major shareholders’ agendas as they are preoccupied with never-ending court cases to acquire each other’s shares. We, the minority shareholders, are receiving the ultimate damage in this process, with the susceptibility of sharp share price falls and uncertainty of the dividend payments.

We believe some structural changes are vital to amend the current deteriorating situation. First, there is an imbalance of debt to equity ratio due to Turkcell’s excess cash, which is suppressing its return on equity. In order to amend this, Turkcell could pay higher dividends, make an acquisition and buy back its own shares. Second, the feud amongst majority shareholders has proven that the only way to ensure company’s operation indifferent to shareholder disagreements is to increase the number of independent members in the board. Around one third of Turkcell shares is free floating, thus it is only fair to have more independent members in the decision-making process. Its board should be able to operate smoothly and complete routine tasks while maintaining investor confidence regardless of the severity of shareholder disputes.

There is another critical issue that we would like to mention. We, as MV Holding, have been one of the largest sponsors in Turkey to the education system, actively taking role in charities and social responsibility projects. We continuously donate funds and provide scholarships to schools and foundations such as TED Istanbul College, TOGV – The Community Volunteers Foundation of Turkey, TEGV – The Educational Volunteers Foundation of Turkey and TESEV – The Turkish Economic and Social Studies Foundation. When we were an active member on the Board of Turkcell, we had founded the scholarship program for underprivileged girls and college students. We have been informed that this program has been halted, cutting ten thousand girls and thirty Master and PhD students out of their education programs. Sustainability of these funds is extremely vital to these students’ education lives as they will not be able to continue their education after a gap.

Therefore, we strongly urge you to reverse this practice immediately. Turkcell’s contribution to education is a company strategy, it is completely irrelevant to shareholder disputes and unless it is reversed, it will induce a public uproar. We are sure none of the members of the board are looking to gain any more negative publicity, in addition to the public fury they already gained through shareholder disputes.

We believe a group of board members representing the shareholders who are incapable of resolving their internal issues, who intentionally block distribution of dividends, who don’t pay attention to the market performance of company’s shares and who cease education programs that serve the public, should resign and leave their places to independent members who would watch Turkcell’s best interests in maintaining its reputation and valuation.

Yours sincerely,

H. Murat Vargı
President of MV Holding

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