Hyperbole is to Turkey what silk is to thread

Michael Hedges November 25, 2007

A few weeks ago the Turkish government put its second largest media company up for bid. All the great and grand were to descend with carts of cash. When the application deadline closed the Citation Xs of Rupert Murdoch, Ron Lauder, Guillaume de Posch and Minos Kyriakou had not touched down. That US$1.1 billion minimum bid, in these gossamer times, shouldn't raise eyeshades back in the accountants' quarry.

Three prospective bidders completed applications before deadline (November 19) for the Sabah-ATV auction, now scheduled for December 5th.  “We have to admit the number of participants are well below our expectations,” said Turkish State Savings Deposit Insurance Fund (TMSF) chairman Ahmet Ertürk at a press conference Tuesday (November 20). “If the tender does not receive sufficient number of bids then we would have to organize a new tender.”

TMSF is the government agency disposing of the assets of the failed Merkez Media conglomerate, once owned by Turgay Ciner. Sabah-ATV is Turkey’s second largest media company, controlling the ATV television channel, Sabah newspaper and dozens of other media related companies. Running up to the tender application deadline Turkish media watchers told of potential bidding by Central European Media Enterprises (CME), News Corporation, ProSiebenSat1, Greek media giant Antenna Group, Saudi Oger/Oger Telecom, andone or more Turkish billionaires.

Saudi Oger, the Saudi Arabian construction company diversified into telecommunications, issued a statement Wednesday (November 21) saying they had ‘kicked the tires’ but the restrictive Turkish ownership laws prevented them from going forward.

Left standing are huge HUGE Turkish industrial conglomerates - Çalik Group, Ipek Matbaacilik and Nurol. Çalik Group is a construction company, pipelines being a primary business, diversified into textiles and telecom infrastructures. Ipek Matbaacilik, a printing and outdoor advertising company, is leading a consortium that includes Europe’s biggest broadcaster RTL and Sancak Construction. Nurol Group, also a mammoth construction company morphed into many heavy industries including defense, has partnered for the Sabah-ATV bid with giant private equity firm Carlyle Group. They’ve done business before; manufacturing armored personal carriers.

“An American friend of mine told me ‘Istanbul is becoming the Big Apple of Europe’,” said Dogan Media Group CEO Mehmet Ali Yalcindag announcing last week the ‘Davos Soiree’ focused on Turkey to cap off the World Economic Forum’s annual meeting in a few weeks. “I think our colleagues in Davos will come to appreciate the fact that Turkey has become a global powerhouse.”

Dogan Media Group is Turkey’s biggest media company, owning radio, TV and newspapers and taking about 45% of all media revenue. It’s significant, though minority, partner in the television company is the German publisher Axel Springer. Dogan Media did not apply to bid for Sabah-ATV.

Politicians and business leaders are taking the message that ‘Turkey is open for business’ to the world. Within that message is the certainty that geopolitically and geo-economically Turkey is at the center of gravity. As a media center, its broadcasters and publishers are world-class – Turkish public broadcasting is very highly regarded as is newspaper Hurriyet - even if media law lags contemporary standards. And Turkey’s media is light-years more sophisticated and productive than regional neighbors. Those neighbors – in Central Asia, the Middle East and South East Europe – show particular promise for media developers and investors. Dubai Media City might be wired but Turkey is connected.

And so it is that major international media companies are bidding where they’re allowed. CanWest, Canada’s largest media company, invested in four radio companies 18 months ago. All have become market leaders. Super FM and Metro FM have national coverage; the former an English-language channel and the later the leading Turkish music channel. Joy FM and Joy Turk FM serve Istanbul with easy listening music, Joy FM in English and Joy Turk FM in Turkish. The sales-house set up by CanWest, CanWest Medya Turkiye, reported in August a 30% share of advertising revenue.

News Corporation entered the Turkish television market purchasing 56% of TGRT, also in 2006. News Corps partner in that deal was Ahmet Ertegün, the Turkish-born founder of the American music company Atlantic Records. Ertegün died in 2007.

German publisher Axel Springer invested €375 million at the end of 2006 in Dogan Media, one of Turkey’s largest media companies, taking 25% share in Dogan TV, operator of Kanal D, CNN Türk and Star TV. In July Deutsche Bank bought 22% of Dogan Gazetecilik, publisher of Milliyet, Radikal and Fanatik, for US$88 million. Turkey’s number one newspaper, the highly respected Hurriyet, is published by a separate Dogan Yagan subsidiary.

Foreign investors are limited to 25% financial holding in any Turkish media company. Murdoch got around the legal restrictions by forming a group with Mr. Ertegün.  Dogan Media got strategic partners in the European heartland.

More broadly, Turkey’s big business is looking outward, certainly to Europe but also into the Middle East and Central Asia. Dogan Media famously bid for ProSiebenSat1 in 2006, losing but not for want of money. Dogan also operates Kanal D in Romania, a joint venture with Swiss publisher Ringier. Several of the Turkish construction companies holding media interests are invested in telecom projects throughout the region.

Turkey’s National Assembly tossed out restrictions on foreign investment in 2006. Former President Ahmet Necdet Sezer cast a veto. Current Prime Minister Recep Tayyip Erdogan is said to favor ending completely foreign investment restrictions in media. To date, a new bill has not been submitted.

Turkey’s largest radio and TV operator, public broadcaster Turkish Radio and Television Corporation (Türkiye Radyo ve Televizyon Kurumu - TRT), also made news last week naming a new Director General. President Abdullah Gül approved the nomination of Ibrahim Sahin, currently undersecretary at the Transportation Ministry. Mr. Sahin has been down this road before, twice nominated and twice vetoed by former President Ahmet Necdet Sezer.

Turkish Radio and Television Corporation (Türkiye Radyo ve Televizyon Kurumu) broadcasts four national television channels and one regional channel. Formed in 1964 TRT is financed through a license tax attached to electricity bills, government subsidies and advertising. TRT also operates five radio channels. By far TRT is Turkey’s largest broadcaster, employing 8,000.

TRT has been without a DG since 2005 when the Yucel Yener retired, reportedly after a political disagreement. Ali Güney, formerly the deputy Director General, has served as acting DG. He was not considered for the DG position, surprising some at TRT.

Last week also presented somewhat of a milestone as a US court upheld a US$ multi-billion award to Motorola and Nokia against the Uzan family, once prosperous media and telecom owners. It seems patriarch Kemal Uzan talked the US and Finnish mobile phone giants into loaning him billions. When he didn’t make the loan payments, Motorola and Nokia chased him through courts across the world.  The aforementioned TMSF claimed Uzan family owned Star TV and sold it to Dogan Media in 2005. Mr. Uzan is, accordingly, on the run.

For Dogan Media CEO Mehmet Ali Yalcindag to truly see Turkey emerge it is not simply a matter of bringing laws to European standards. If anything, Turkey has been liberated by the cooling of European Union accession talks. He knows, perhaps better than most, the future for Turkey and its media companies is bridging the resources of Central Asia, the needs of the Middle East and the knowledge of Europe.

And, too, all bridge builders understand the act of faith.

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