Unlike a waiter in a good Turkish restaurant, I'm serving up only a single appetizer to whet your appetite. As an introduction to investing in Turkish stocks, I'd like to present a mere sampling of the delights awaiting you at your table on the floor of the Istanbul Stock Exchange. Take one and pass the meze tray to the right, please.

The natural place to begin when talking about Turkish stocks is with Turkcell (NYSE:TKC), Turkey's largest mobile-phone operator and the country's only American Depositary Receipt (ADR) to be listed on the New York Stock Exchange. (ADRs are issued by U.S. banks to make it easier for American investors to trade in foreign stocks.) Trading at a 36% discount to its 52-week high and with a P/E ratio currently exceeding 18, Turkcell offers investors an interesting option in international investing. Investors will need steady nerves and a strong stomach for this one, however. More on that in a moment.

Land of the crescent and star
Before looking at the company itself, we need to understand the broader investment environment. Straddling two continents, Turkey truly is the place where East meets West. Looking at all that's occurred there in recent years -- earthquakes, terrorist attacks, financial crises -- you would be justified in being concerned about the stability of the country.

In fact, Turkey is still an emerging market, with pretensions of becoming officially "European" by enrolling as a European Union state -- though growing skepticism in existing member countries toward Turkey has recently dimmed its EU aspirations. But regardless of whether Turkey eventually joins the EU club, it will remain a hot place to invest. Turkey's population of 72 million is young and growing -- it's potentially the second-largest market in Europe, behind Germany -- and its economy is the 16th largest in the world. The U.S. Department of Commerce has identified the nation as having one of the 10 most promising emerging economies, and a recent World Bank study also declared Turkey one of the 10 countries most likely to enter the top tier of the world economy.

The Turkish economy has become more robust and resilient to shocks, thanks to stabilization programs that the government began implementing in 1999 with the backing of the International Monetary Fund. Turkey is still vulnerable to financial market volatility and sharp changes in investor sentiment, however, given its bulging current-account deficit and its large amount of debt at the government level. So in the overall assessment, it's fair to say that the risk in Turkish investment is moderately high, though it has been declining.

Plunging into the Istanbul Stock Exchange is a bit like entering the Grand Bazaar: it's chaotic, volatile, unfamiliar, overpowering, and exciting -- a sensory junkie's delight. The white-hot ISE 100 index is up 54% from a year ago, compared with an increase of 16% for the S&P 500. But if you decide to invest in the Turkish market, you won't be alone. Foreign investment in the market accounts for more than 50% of free float.

A Turkish delight
That takes us back to Turkcell. Business Week recently placed Turkcell in its Info Tech 100 list for the third year in a row. The list is made up of companies that earn their rankings using four criteria: return on equity, shareholder return, revenue growth, and total revenues. This year, Turkcell ranked 14th overall on the list, up considerably from 97th last year, and it placed eighth in shareholder return alone. The company's share prices have risen 45% in the past year. That certainly makes it worth a look.

The mobile-phone business is relatively new in Turkey. Since the 1998 launch of Turkey's first two mobile-phone operators, Turkcell and Telsim, subscriptions have risen sharply to reach a penetration rate of more than 50% of the market in 2004. That number places Turkey well above countries in the Middle East such as Egypt (10% penetration) but also well below EU countries, where penetration rates top 70%. Still, with an estimated 67% market share, Turkcell dominates its local market and is far ahead of its rivals, No. 2 Telsim (19%) and Avea (14%). (The latter company was formed from a recent merger between two weaker mobile-phone companies). What's more, Turkcell continues to capture more than 50% of new customers.

Turkcell's income statement for fiscal 2004 reflects its strong market position. Applying U.S. generally accepted accounting principles, the company reported total revenue growth of 44% for FY 2004. Income from operations was up 309%, and net income climbed 138%.

The devil's in the details
But although demand is healthy, most mobile-phone operators are in poor financial shape, still suffering the fallout from the global crash in technology stocks and Turkey's 2001 financial crisis. While Turkcell as a business entity may be in good shape, its key shareholder -- the financially troubled conglomerate Cukurova -- has had serious problems. Cukurova owns 42% of Turkcell's share capital, and Swedish-Finnish telecom group TeliaSonera owns an additional 37%, with most of the balance in free float. But Cukurova's stake includes shares held by its own Yapi Kredi Bank (YKB), which was placed under the management of the Turkish receiver Savings Deposit Insurance Fund (SDIF) when Cukurova's other bank, Pamukbank, collapsed in mid-2002. Cukurova must repay debts of about $5 billion to the SDIF and YKB if it is to be allowed to buy back the bank's shares and retain control of Turkcell, its flagship money-earner.

In a controversial deal, the Russian Alfa Group has agreed to a $3.3 billion financing package, consisting of a $1.7 billion six-year loan to the debt-stricken Cukurova Group, and a purchase of convertible bonds that can be exchanged for a 13% share in Turkcell for $1.6 billion. This arrangement upset the apple cart with TeliaSonera, Turkcell's Swedish-Finnish owner, which made clear its ambitions to buy up another 27% in late March from Cukorova and had already come to a comparable arrangement with the conglomerate. Almost immediately, Alfa Group -- which had no previous links to Turkcell or Cukurova Group -- announced that it planned to outbid TeliaSonera for the stake. Cukurova accepted the Alfa offer, claiming that it was responding to political demands that Turkcell be kept in Turkish hands. The deal, representing the biggest external investment in Russia's recent history, has the support of both the Russian and Turkish governments, even though TeliaSonera is squawking about taking legal action to enforce the earlier agreement.

Still interested?
Messy? Still eyeballing Turkey and Turkcell as an investment opportunity? Don't worry . it does get better.

With the cash infusion from Alfa Group, Turkcell's majority owner, Cukurova, is undoubtedly in a much stronger financial position than previously. The Turkish market, meanwhile, is reaching saturation, and Turkcell's domestic strategy is to focus on customer retention; it must look elsewhere for sustained growth. Through direct and indirect investments in Iran, Azerbaijan, Kazakhstan, Georgia, and Moldova, Turkcell is doing just that, evolving from a domestic leader to a strong regional player. A further 20% improvement in revenue growth for the current year and at least that much in net income are not unrealistic goals.

Turkcell also seems not to be overpriced compared with many of its global peers, such as the Mexican wireless concern America Movil (NYSE:AMX), Spain's Telefonica Moviles (NYSE:TEM), and China Mobile (NYSE:CHL). Most analysts rate Turkcell at least a solid "hold," but my read on the future value of the Turkish economy and Turkcell's dominant market position lead me to a more positive outlook. If you venture into the Turkish market, just make sure you go into it with a strong stomach, and be prepared to accept some volatility as a component of your portfolio.

As much as Fool contributor David Compton loves Turkish food, he does not own shares of any company mentioned in this article. The Motley Fool has a disclosure policy.