Saudi Telecom frontrunner for Turk Telekom stake -sources

By Ebru Tuncay and Orhan Coskun

ISTANBUL/ANKARA (Reuters) - Saudi Telecom Company is in the lead to buy the 55 percent of fixed-line operator Turk Telekom owned by Oger Telecom, sources said, adding that the Turkish government could acquire the $3.9 billion stake if those talks fail.

The potential deal comes as Oger, Turk Telekom's biggest shareholder, faces increasing pressure from creditor banks after missing debt repayments of $290 million in both September and March on a $4.75 billion loan.

Three sources said that Saudi Telecom Company (STC) is seen as the most likely buyer, with two of the sources saying that the Turkish government could consider using a public institution to acquire the holding if the talks fail.

"Currently only STC shows a clear interest in the acquisition," one of the sources said, adding that there are several interested Gulf companies but only STC has entered negotiations.

"The government may play an active role as a buyer with a public institution, in the case that STC does not buy," the source said, asking not to be identified because the information has not been made public.

No one was available to comment at Oger's offices in Turkey. STC declined to comment, as did Turk Telekom, while Turkish government officials were not immediately available for comment.

Oger is a unit of Saudi Arabian construction giant Saudi Oger, which itself is facing a multibillion-dollar debt restructuring. STC already holds an indirect 35 percent stake in Oger's Turkish arm.

The government, which ultimately holds nearly 32 percent of Turk Telekom, wants the operator of the national telecoms grid to be owned by a financially stable company.

"Turk Telekom is a strategic and important company. It will not be left to its fate for sure. Public institutions would intervene when needed and this option is still a matter of consideration," another source said.

BIG LOAN, WEAK LIRA

Oger's creditors want the sale to be completed by September to retain the loan's classification as "performing" and avoid an increase in bad loan provisions, another source said.

"If the debt is no longer a performing loan, banks will have to raise provisions and their profitability will be put under pressure," the source said. "Banks are meeting with independent auditors to keep this credit as a performing loan until the end of the year."

As part of a 2013 debt refinancing, Oger took out a $4.75 billion syndicated loan, one of the biggest ever in Turkey. However, it has struggled to repay the debt as the Turkish lira has been hammered by security concerns and political worries.

Since 2013 the dollar has gained about 86 percent against the lira, nearly doubling the cost of the debt in local currency terms.

Oger's roughly 30 creditor banks include Turkey's Akbank and Garanti, with $1.5 billion and $951 million of exposure respectively. Isbank, Turkey's largest listed lender, has 1.9 billion lira ($532 million) of exposure.

Though the Turkish government has the final word on changes in Turk Telekom's ownership, Oger's creditors also have a say in any potential sale because it pledged the Telekom shares as collateral for the 2013 loan.

Turkey's Treasury sent Oger a written demand earlier this year after Oger failed to meet the two debt payments and asked the company to meet its debt obligations, Reuters reported last month.

Reuters also reported last month that the government has stepped in and asked some banks to find prospective buyers for the stake.

(Additional reporting by Reem Shamseddine in Khobar; Writing by Dirimcan Barut and Ece Toksabay; Editing by David Dolan and David Goodman)