Following the Cabinet's approval of the SPO process on January 14, the SPO decision for the Treasury's 6.68% stake in Turk Telekom was published in the Official Gazette today. The SPO is expected to be completed by the end of 2013 and the details associated with the green shoe option will be decided by the Tender Commission.

Based on yesterday's closing price of TRY7.70, the SPO size will be TRY1.8bn (ca.USD1.02bn) and the stock was trading at 5.95x of its 2013E EV/EBITDA and 10.2x of its 2013E P/E multiples and has a dividend yield of ca.9%.

The government will reduce its stake from 31.7% to 25%+1. The method will be a secondary public offering:

Timing: by end of 2013
Size: 6.68%
Current free float: 12.5%

Comment: The timing is longer than expected. We initially had expected the SPO to be completed after the FY12 results announcement in February. Now the overhang issue will continue to put pressure on the share price for longer time. The underlying performance is not affected and will continue be strong in 2013e.

Nevertheless, we would see more upside potential for TCELL with the Privy Council decision expected any time soon, the prospect of large dividend (1.5-2 years) and the strong growth in the domestic mobile market. We will review our rating and for the moment, we would switch to overweight TCELL rather than TTKOM.

Source: bne