VZCZCXYZ0003
PP RUEHWEB

DE RUEHIT #0864 2680631
ZNR UUUUU ZZH
P 250631Z SEP 07
FM AMCONSUL ISTANBUL
TO RUEHC/SECSTATE WASHDC PRIORITY 7529
INFO RUEHAK/AMEMBASSY ANKARA PRIORITY 7123
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS ISTANBUL 000864 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EINV ECPS TU
SUBJECT: 3G AUCTION CANCELED; VODAFONE DECRIES UNFAIR 
COMPETITION 
 
SENSITIVE BUT UNCLASSIFIED, PLEASE PROTECT ACCORDINGLY 
 
¶1.  Summary:  Atilla Vidai, Vodafone Turkey CEO, argued the 
September 19 decision by the Turkish Telecommunications Board 
to cancel the 3G auction in which only one of the three 
wireless providers (Turkcell) currently operating in the 
Turkish market chose to bid was proof that the Turkish mobile 
phone market needed significant reform prior to the 
introduction of 3G wireless service.  Vidai explained that as 
far as the technical requirements for 3G were concerned, 
Turkey was completely ready; however market conditions were 
still not ripe for the introduction of 3G.  Vidai argued that 
once reforms are complete Vodafone is prepared to make 
significant investments to bring 3G to the small sector of 
the Turkish market that could benefit from the new 
technology.  End Summary. 
 
¶2.  On September 19, the Turkish Telecommunications Board 
announced that the September 7 3G wireless auction in which 
only Turkcell had submitted a bid had been canceled. 
Vodafone, the second largest mobile telephone service 
provider in Turkey with 24% of the market, and Avea the third 
largest service provider with 16% did not participate in the 
auction.  Vodafone CEO Atilla Vidai claimed that Turkcell's 
consistent anti-competitive behavior was the reason for 
Vodafone's deciding not to bid.  According to Vidai , 
although Vodafone was not the initial 3G developer it was now 
the world leader in the technology and was thus the logical 
company to bring 3G to the Turkish market.  (3G is a wide 
area cellular telephone network incorporating high-speed 
internet access and video telephony; 4G, also know as mobile 
WiMAX, is a higher frequency data technology with scant 
applicability for voice.)  Vidai acknowledged that 3G's data 
applications would hold little appeal for the mass market, 
but argued that the small segment 
of the Turkish market likely to sign on for 3G would be 
profitable for his company. 
 
¶3.  Vidai agreed that later entrants generally find it 
difficult to wrest market share away from the initial 
technology provider in any wireless market and that neither 
Vodafone (formerly Telsim) nor Avea was a strong competitor 
until very recently.  However, he argued that Turkcell's 
approximately 60% share of the Turkish market despite two 
other wireless providers actively in the market was 
unprecedented worldwide.  He ascribed Turkcell's ability to 
retain market share to consistent anti-competitive behavior, 
in particular Turkcell's unwillingness to negotiate number 
portability.  He implied Turkcell, which is partially 
government-owned, benefited from the lack of action by 
competition authorities against behavior which would be 
unacceptable in the United States or Europe. 
 
¶4.  Vidai singled out the lack of number portability in the 
Turkish mobile phone market as well as 'predatory pricing' by 
Turkcell as reasons for why Vodafone (and Avea) were unable 
to compete on a level playing field with Turkcell. 
Describing Turkcell's tariff structure as an "abuse of market 
power" Vidai alleged that Turkcell sold certain 
within-network (i.e. Turkcell to Turkcell) calls below the 14 
cents/minute cost of providing the service and recouped the 
difference by setting the fee for out of network calls 800% 
higher than within-network calls.  Turkcell pre-paid cards 
are sold in units called "kontors."  A kontor costs 
approximately 12 cents.  In the cheapest Turkcell package, 
which is marketed to students,  one kontor buys 10 minutes of 
within-network calling (equivalent to a fee of 1.2 
cents/minute) while 8 kontors are required for each minute of 
any out-of-network call (approximately 94 cents/minute.) 
 
¶5.  So far Vodafone has opted to attempt to negotiate with 
Turkcell rather than bringing a case to the Competition 
Board, however Vidai cautioned that time and options are 
running out and that Vodafone will soon have no choice but to 
seek redress through the regulatory authorities. 
WIENER