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Turkcell: Iranian Espionage, South African Corruption, and U.S. Election Politics

September 11, 2012 | About:
There is never a dull moment when owning Turkish telecom provider Turkcell Iletisim Hizmetleri (TKC). As I’ve highlighted in recent articles, the company is still embroiled in a multi-year, intercontinental boardroom struggle that would rival a daytime soap opera for melodrama and intrigue.

Two rival shareholder factions are fighting for control, and after bouncing around courtrooms in Turkey and the Caribbean, the case is now being reviewed by Britain’s Privy Council.

Yes, the Privy Council of the Queen of England…for a Turkish mobile phone company. I couldn’t make this up if I wanted to.

And now, Turkcell is involved in another international scandal that involves Iranian espionage, United Nations vote rigging and Republican presidential hopeful Mitt Romney.

Turkcell is suing South African mobile giant MTN for $4.2 billion over allegations the company won contracts by bribing Iranian officials with promises of weapons and South African support for Iran at the United Nations (see article). MTN also allegedly helped the Iranian regime spy on its own citizens.

No, this isn’t a movie script. It’s business as usual in this part of the world, though the dispute has managed to spill over into U.S. politics. One of President Obama’s chief advisors took $100,000 from MTN to deliver speeches, leading Republicans to allege that the President has an Iranian fifth columnist in his ranks. Meanwhile, Mitt Romney is a shareholder in Turkcell, meaning that he has a vested interest in the outcome of the lawsuit against MTN.

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In spite of all of this drama, Turkcell’s management has done a fine job of running the company. And as investor risk appetites have returned, Turkcell has seen a monster rally in its shares.

Since hitting a bottom in late May, Turkcell is up nearly 40%. And barring a relapse into crisis by the Eurozone, I believe the stock has much further to run. It is priced at only 11 times expected 2013 earnings, and once the boardroom fiasco is put to rest—and at the risk of sounding like a broken record, it soon will be—investors will likely enjoy a large cash bonus from past years’ unpaid dividends and a regular dividend in the ballpark of 3-4%.

I chose Turkcell as my entry in InvestorPlace’s 10 stocks for 2012 contest because I considered it a conservative way to play the emergence of Turkey and its up-and-coming middle class. Thus far, the pick has performed even better than expected, up 26% year to date. With one quarter remaining, Turkcell is in second place, trailing only Capital One (COF).

About the author:

Charles Sizemore
Charles Lewis Sizemore, CFA is the Chief Investment Officer of Sizemore Capital Management. Please contact our offices today for a portfolio consultation.

Mr. Sizemore has been a repeat guest on Fox Business News, has been quoted in Barron’s Magazine and the Wall Street Journal, and has been published in many respected financial websites, including MarketWatch, TheStreet.com, InvestorPlace, MSN Money, Seeking Alpha, Stocks, Futures, and Options Magazine and The Daily Reckoning.

Visit Charles Sizemore's Website


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