Xavier Niel buys Turkcell's Ukraine assets, reportedly eyes Altice Portugal

Niel's investment firm, NJJ Capital, late last week agreed to acquire Turkcell's various Ukrainian units, which comprise mobile operator Lifecell, towerco Ukrtower, and the local unit of its customer experience solutions provider Global Bilgi.

Turkcell announced the deal in a brief statement with little fanfare. It didn't even provide a reason for the sale, simply stating that "developments will be fully and timely disclosed to the public."

Until then, speculation will have to suffice, and not much digging is required to find one possible motive.

Reports in late November highlighted surging exports of essential goods from Turkey to Russia, both directly and via former Soviet states suspected of acting as intermediaries. Exports include so-called dual-use items that have both civilian and military applications.

In the first nine months of last year, the value of Turkish exports to Russia reached €144 million, three times higher than the same period of 2022. This increased trade activity has attracted scrutiny from both the US Treasury and the EU.

Given that Turkcell's biggest single shareholder is Turkey's sovereign wealth fund, TWF, and that Turkcell's recently-appointed CEO, Ali Taha Koç, previously served as head of information technologies at the Turkish Presidency, Turkcell and the Turkish government are inextricably linked.

Furthermore, in October, a Ukrainian court ordered the seizure of Lifecell shares owned by three Russian businessmen, Mikhail Fridman, Peter Aven, and Andrei Kosogov – all of whom are subject to sanctions – as part of Kyiv's efforts to assert control over strategic assets.

It is therefore not too far-fetched to suggest that Turkcell might have been under some pressure to find a way out of Ukraine.

Financial terms were not disclosed, but a report by Bloomberg said the assets have a combined nominal value of 15.13 billion Ukrainian hryvnias ($396.7 million), with Lifecell accounting for UAH12.7 billion of that sum.

Meanwhile, Niel gets the benefit of acquiring one of Ukraine's biggest mobile operators, the major downside being the routine targeting of mobile networks – including Lifecell's – by the Russian military.

Niel has been on something of a shopping spree lately. While NJJ was hammering out the Ukraine deal, reports emerged that the telco tycoon is also mulling a move for Altice Portugal.

Sources cited by Bloomberg towards the end of December claim Niel has expressed interest in acquiring Altice Portugal, joining a list of fellow potential suitors that includes Saudi Telecom Co (STC), private equity firms Warburg Pincus and Zeno Partners, and former Credit Suisse chairman António Horta-Osório.

Altice owner Patrick Drahi is considering asset sales as a means of tackling his massive $60 billion debt pile. Altice Portugal, which is also reeling from a corruption scandal involving co-founder Armando Pereira, is widely-believed to be one such asset on the chopping block.

In addition to Ukraine and Portugal, Niel in November took a 6% stake in Belgium's Proximus, and in December he proposed a merger in Italy between his Iliad unit and Vodafone.

As Drahi's situation illustrates, rising borrowing costs have made some companies and investors more open to offers, and Niel seems only too happy to oblige.