Slow and steady wins the race: Nokia
Like its archrival Motorola
Unfortunately for both of the lenders, Telsim defaulted on its debts. Its owners, Turkey's Uzan family, have forfeited the company in its entirety to the Turkish Savings and Deposit Insurance Fund (TMSF). The TMSF has its own bone to pick with the Uzans, claiming that the family owes it $6 billion. And that's not all. Apparently, the Uzans owe yet another $600 million to $700 million to various other Turkish government agencies. The family's total liabilities amount to more than $10 billion.
Both Nokia and Motorola have done what they could to secure their claims against Telsim. Motorola sued the Uzans in both American and British courts, and it won verdicts in its favor in both jurisdictions last year. And in February 2004, Nokia won an arbitration ruling in its favor in Zurich. But faced with the prospect that it will probably never collect on its loans, Nokia has already taken an $818 million charge to its own profits.
But now comes Nokia's announcement from yesterday. The good news for the telecom is that it has reached an agreement with the TMSF to share in the proceeds when that agency auctions off Telsim's assets. (There's been no news yet on whether Motorola has worked out a similar arrangement.)
Although Nokia shareholders may see their company get an unexpected but most welcome mini-windfall when Telsim is sold in December, they shouldn't get their hopes up too high. Remember that Telsim has $10 billion in debts, and the bulk of that amount is owed to the Turkish agency that's running the auction. Moreover, the auction's bidding is expected to start at just $2.8 billion. Even if the winning bid is twice that amount (which is unlikely), and even if TMSF splits the proceeds proportionally among all the debtors, Nokia will almost certainly not see its entire principal repaid.
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