Wednesday, February 24, 2010

Turkcell on sale

Simple market thesis, find a wide moat, buy and hold. Easier said than done.

Turkcell, the #1 cell phone provider in Turkey is one such company. Beyond the huge domestic market share (57%) and wonderful dividend policy (50% of profits to shareholders), this company holds a huge economic moat. The mobile telecom market naturally requires huge capital investment, and thus the barriers to entry are huge. Also, as in most emerging economies, telecom companies are often partially privatized but still national champions of the current regime. Turkcell is no different. No one in Turkey wants Turkcell to fail.

Purchasing this stock with .79 cent dividend (5.1% yield at $15) does incur currency risk. But economy of Turkey has held up very well in the recent economic crisis and has even been marked for a rating upgrade by the major rating agencies.

Although a large part of Turkcell is already foreign owned, at some point in the future I could see a major multinational moving in and buying Turkcell to extend their geographical footprint. But for now, I am content with the high growth and high yield.

The author is long TKC at $15/share.


Lockstep said...

Turkcell has fallen recently based on competition concerns and overall economic growth concerns. Yet Turkey has the ability to devalue it's currency if it faces any problems, so I am not too worried.

Long term, this is the market leader in the country and the region. Debt crisis or no debt crisis, the Turks will continue to buy wireless service. Long term hold.

Lockstep said...

I should have picked up more when it dropped to $12.50, but I did not. Darn. The fundamentals are still in place. This is a great long term hold.


I remember their was a tele com company that was involved in fruad in turkey.