This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 ANKARA 000094 
 
SIPDIS 
 
STATE FOR EUR/SE, EB/IFD, AND EB/CIP 
TREASURY FOR RADKINS AND MMILLS 
USDOC FOR 4212/ITA/MAC/CPD/DDEFALCO 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECPS EINV TU
SUBJECT:  TURK TELEKOM: FROM MONOPOLY TO COMPETITION 
 
REF: A) 04 Ankara 6484 
     B) 04 Ankara 6673 
 
Sensitive But Unclassified.  Please handle accordingly. 
 
¶1. (SBU) Summary.  State telecommunications monopoly Turk 
Telekom (TT) has been taking steps to maintain its 
dominance in Turkey's newly liberalizing telecom market, 
including by making significant investment in new 
technology in order to strengthen its "natural monopoly" 
position in the market.  TT Management hopes its 
extensive network infrastructure - in combination with 
consistent profitability - will be attractive for 
potential buyers.  End Summary. 
 
¶2. (SBU) On December 2, Turk Telekom (TT) General Manager 
Mehmet Ekinalan briefed us on the company's activities 
and privatization prospects.  Ekinalan pointed out that 
TT was a profitable company, despite its requirement to 
invest and provide service in unprofitable areas as a 
state service provider.  Ekinalan said TT received 50% of 
its revenues from only 10% of its subscribers, those 
residing in big cities. 
 
¶3. (SBU) Ekinalan expressed full support for TT's 
privatization, emphasizing that he could not manage a 
business in a competitive and consumer oriented 
environment with the bureaucratic constraints of being 
directly part of a government ministry.  The GM was 
optimistic about TT's prospects for privatization, since 
he thought this was the first time the GOT was fully 
committed to privatize the company.  Ekinalan noted that 
TT had achieved USD 6.5 billion turnover in 2003, and 
recorded USD 1 billion net profit.  Given these figures, 
Ekinalan thought it would not be difficult for a 
prospective buyer to calculate the value of TT.  Ekinalan 
said the GOT would like to see TT remain as an active, 
competitive (read, dominant) operator in Turkey in the 
long term. 
 
¶4. (SBU) Ekinalan described TT's extensive fiber cable 
investment in Turkey, reaching as far as small villages. 
He pointed out the capacity of such infrastructure to 
support other networks and technology, such as cable TV 
and ADSL high speed internet, further strengthening TT's 
natural monopoly position.  With respect to TT's 
international connection, Ekinalan mentioned a new cable 
linkage recently made to Italy through Greece, raising 
the company's high speed internet capacity and 
connectivity for its customers.  The GM admitted that it 
would be hard for newcomers to compete with TT in some 
areas, noting that it would require a considerable amount 
of investment and patience.  Ekinalin claimed that he 
supported liberalization and competition, but stressed 
that it must be fair and give consideration to past 
investment and mandates for service for smaller towns. 
 
¶5. (SBU) Ekinalan also responded to the criticism by 
private telecom companies newly entering the long- 
distance market on TT's high interconnection fees. 
Ekinalan said the companies' expectations were 
unrealistic: they expected to make profits without making 
any investments.  The TT GM claimed TT's infrastructure 
investments (USD 500 million this year, for example) 
justified the interconnection fees, and said the fees in 
Turkey could not be directly compared to those in EU 
countries.  Ekinalan noted that EU countries used a fixed 
fee structure, which enabled the telecom provider to keep 
interconnection fees low.  In any case, Ekinalan expected 
the interconnection fee problem to be resolved soon, 
asserting that TT had reached an agreement with 20 of the 
40 companies that received telecom operator licenses 
earlier in 2004. 
 
¶6. (SBU) Comment: Turk Telekom's management will continue 
to take advantage of its entrenched monopoly position for 
as long as it can.  Potential investors in TT will expect 
that dominant position to endure; i.e., achieving 
privatization/liberalization as practiced in many 
European countries where the privatized national operator 
maintains a dominant market share.  This may delay broad 
telecom market diversification and limit new companies 
entering the market.  In the meantime, many factors will 
continue to delay TT's privatization, no matter how 
committed management and (some in) the GOT (reftels). 
End Comment. 
 
Edelman