Cyprus company sues Turkey’s Telsim for $738 mln

May have impact on Vodafone bid for Telsim

Rosamara Trading Ltd., a Cyprus based international investment firm, has presented a demand to Turkish telecom giant Telsim Mobil demanding full payment on over USD 738 mln in bearer promissory notes that were issued by Telsim in 2003. The notes matured earlier this year and are secured by the assets and roaming income of Telsim, Turkey’s second largest cell phone operator.

Telsim’s operations were taken over by Turkey’s state deposit insurance fund (SDIF) in 2004, after the bonds were issued and entered on the corporate books.

Several months ago the SDIF conducted a public auction of Telsim’s assets and received bids from telecom groups located in Europe, the Middle East and Russia. The winning bid of USD 4.5 bln was submitted by British telecom giant Vodafone.

“The SDIF and Vodafone have been attempting to close the deal sometime this spring, but that time-table may now be delayed if Telsim, now operated by the SDIF, does not honor the notes,” said Michael Michaelides, lawyer of Rosamara Trading in Nicosia.

“Telsim must make payment on these notes within 48 hours or else it will be in default. In that event, Rosamara has the right to seize any assets of Telsim to honor these obligations, including any roaming charges anywhere in the world,” Michaelides told the Financial Mirror.

As a large cell phone operator connecting calls throughout Europe, Telsim has billions of dollars of assets in Turkey as well as tens of millions of dollars in outstanding roaming charges in countries such as the United Kingdom, Germany, Italy, France, and Russia.

Rosamara also informed Vodafone that the auctioned assets of Telsim are security for the promissory notes, and that any effort to purchase the securitized assets would expose Vodafone to liability. Under the terms of the promissory notes, Rosamara could pursue Telsim’s assets to satisfy the notes even if the Vodafone deal goes through.

The law firm of Michael Michaelides is expected to file the case in a Cyprus court before the end of the week.