A dispute among the shareholders of Turkcell, the biggest Turkish mobile-phone company, blocks important decisions and delays the expected acquisition of Bulgarian incumbent telco BTC, according to reports.

The Turkish company is believed to be the most likely buyer of the Bulgarian company, which operates under the brand name Vivacom, after putting in a bid of over EUR 870 M for a 94% stake, Capital daily reported earlier this month, citing well-informed sources.

The deal was expected to be concluded around the Easter holidays, but a shareholder dispute has thrown a spanner in the works, according to The Economist magazine.

The country's second richest man, Mehmet Emin Karamehmet, is fighting to keep control of the firm he co-founded, the report says.

His Cukurova Holding, a family-owned group, is pitted against Turkcell's two other big shareholders, TeliaSonera, a Nordic telecoms operator, and Altimo, a subsidiary of Alfa Group, a large Russian investment firm.

According to the report as a result, important decisions are blocked - Turkcell's shareholders still have not seen a dividend for 2010, while two extraordinary shareholder meetings ended in fiasco last year.

The problem is a stalemate on the seven-member board: each big shareholder has two board seats, but five votes are needed to carry decisions. Even though Altimo and TeliaSonera have joined forces, they need the vote of the independent chairman, Colin Williams. TeliaSonera argues that he is not truly independent and is denying shareholders the right of a vote to replace him.

The Economist points out that even paralyzed, Turkey's biggest mobile operator is thriving and forecasts that revenues and subscribers are likely to grow.

The company serves 35m subscribers there and another 30m through subsidiaries and minority stakes in other countries. It boasts 10 billion Turkish lira (USD 5.6 billion) in annual revenues and a market capitalization of USD 10.7 billion (it is listed in both New York and Istanbul).

In the past year alone Turkey added more than 3.5m mobile subscribers, yet mobile penetration is only 89%, well short of the EU average of 126% (ie, there are more phones in Europe than people).

Turkcell announced its decision to make offer for a 93.99% stake in Vivacom at the beginning of March in a statement to Istanbul Stock Exchange, becoming the only strategic investor in the tender.

The amount of the 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".

Another three binding bids were 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).

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

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

The deadline for submitting binding bids, initially set at February 17, was extended by ten days at the request of Turkcell, who needed more time to take a definitive decision.

Earlier this year reports emerged that Telekom Austria AG, which already owns Mobiltel in Bulgaria, may be interested in Vivacom sale, but the information was eventually denied.

Vivacom - formerly known as the Bulgarian Telecommunications Company (BTC) - has gone through a number of controversial privatization deals.

The long-drawn-out and widely criticized EUR 230 M sale deal for 65% stake in Bulgaria's telecom operator BTC was sealed at the end of February 2004 after nearly two years of procedural predicaments, legal and political battles.

Months later Icelandic businessman Thor Bjorgolfsson bought Viva's stake for EUR 300 M and resold it to the investment company AIG Central Europe for EUR 1.08 B.

AIG Investments acquired 65% of the former state-owned telecommunications firm in May 2007. Then in August of the same year it upped its investment to 90%.

Chinese telecoms and media tycoon Richard Li, chairman of Asian telco PCCW, 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.

The unit was renamed Pinebridge Investments ahead of the takeover by Li's Pacific Century group.

Dubai-based Oger Telecom was the closest to taking over the management of the company following negotiations that dragged on for nearly half a year. The deal however failed because the final offer was not satisfactory, according to insiders.

The nation of 7.7 million people has three mobile operators, which are foreign owned. Mobiltel is controlled by Telekom Austria, while Globul is the local unit of Greece's OTE.

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