1. M&A Transactions under Turkish Telecommunications Law Senem İşmen Partner Hergüner Bilgen Özeke Attorney Partnership

2. Outline of Presentation I.Overview of Telecommunications Legislation 1.1Primary Legislation 1.2 Secondary Legislation 1.3 Authorization Procedure II.M & A Transactions in Telecommunications Sector 2.1Share Transfer Deals 2.2Asset Transfer Deals 2.3 Transfer of Licences III.Role of Regulatory Actors in M&A Transactions in Telecommunications Sector

3. I.Overview of Turkish Telecommunications Sector 1.1 Primary Legislation PTT – State Monopoly days Law No. 406 (dates back to 1924) Amending Law No. 4502 (2000) * Separation of policy-making and regulatory functions * Establishment of an independent telecoms regulatory body * Making Turk Telekom subject to private law provisions * Ending Turk Telekom’s de juro monopoly (telephony and infrastructure) as of 31 December 2003 * Official announcement of liberalization of telecommunications sector Law No. 4673 (2001) * 100% privatization of Türk Telekom * Foreign ownership in Türk Telekom allowed but limited to 45%

4. I.Overview of Turkish Telecommunications Sector 1.1 Primary Legislation Law No. 5189 (Electronic Communications Law) (2008) *Telecommunications Authority → Information Technology & Communications Authority * Regulate whole communications sector under framework law * Harmonize relevant Turkish regulations with EU requirements *Launched “authorization regime” → Notification /Right to Use *Second wave of liberalization * Annulment/total revision of various laws, regulations etc, i.e. Wireless Law /Law on Ministry of Transportation

5. I. Overview of Turkish Telecommunications Sector 1.2 Secondary Legislation Major changes in 2009/2010 in line with Law No 5189 Old Authorization Regulation v. New Authorization Regulation Access & Interconnection Regulation (2009) Operators with Significant Market Power & Determination of the Obligations Imposed on such Operators (2009) Regulation on Number Portability (2009) Numbering Regulation (2009) Regulation Determining the Principles and Procedures for Protection of Operators’ Confidential Information (2009) Tender Regulation on Authorization regarding the Electronic Communications Sector (2010) Regulation on Right of Way (2010)

6. I. Overview of Turkish Telecommunications Sector 1.3 Authorization Procedure New Authorization Regulation Old Authorization Regulation Authorization NotificationRight to Use Limited Number of Operators Unlimited Number of Operators Authorization Concession/ Authorization Agreements Licensing 1. Type 2. Type General Authorization

7. I. Overview of Turkish Telecommunications Sector 1.3 Authorization Procedure Legal entities providing electronic communication services or laying down an electronic communication network or infrastructure are required; A.To notify the ITC Authority in advance if there is no request for any resource allocation B.To obtain right to use if there is request for “resource allocation” (e.g., number, frequency or satellite position); (i) Scarce resources and number limitation for operators OR (ii) No number limitation for operators Term of Right to Use:Maximum 25 years

8. II. M & A Transactions in Telecommunications Sector 2.1 Share Transfer Deals A.Concession Agreements Must review specific provisions of Concession Agreements and applicable provisions of Authorization Regulation Authorization Regulation is recent and contains more detailed provisions compared to current Concession Agreements Fixed Voice Concession Agreement: Share transfers to be realized in compliance with the applicable regulations. GSM Concession Agreements: First 5 years, out of group share transfers exceeding 10% of Licensee shares, subject to approval of ITC Authority [5 years expired for all current GSM concessions] Authorization Regulation: * All share transfers → notification to ITC Authority * Share transfers triggering “change of control” → approval of ITC Authority.

9. II. M & A Transactions in Telecommunications Sector 2.1 Share Transfer Deals B.Notification & Right to Use For direct share transfers at Licensee level, (i)Operators with “limited” right to use → any & all share transfers (i)Operators with “unlimited” right to use OR “notification” → only share transfers triggering change of control will be notified to ITC Authority within a maximum of two months. For indirect share transfers (above Licensee shareholder level) notification to ITC Authority is not necessary. Mergers/Take Overs are subject to ITC Authority approval (Art. 19/ç)

10. II. M & A Transactions in Telecommunications Sector 2.2 Asset Transfer Deals A.Concession Agreements * Upon expiry or non-extension of concession:  Fixed Voice Concession Agreement: All equipment that operates relevant system and all immovable bearing all such equipment, shall be transferred to regulator.  GSM Concession Agreements: Network Management Center, Gateway switchboards and central subscription systems, all equipments and immovables shall be transferred to regulator. *Confirmation WHETHER target asset subject to transfer is part of “Concession Infrastructure” ? If, target asset is NOT, part of concession infrastructure → transferable Concession assets cannot be transferred without associated concession. is part of concession infrastructure → asset transfer is restricted. Concession assets cannot be transferred without associated concession. [BEWARE: transfer of concession, triggers transfer of right of way established on assets]

11. II. M & A Transactions in Telecommunications Sector 2.2 Asset Transfer Deals B.Notification * Asset transfer is not subject to any limitation C.“Unlimited” Right to Use *Transfer of “allocated resources” (eg. frequency, number etc) → ITC approval partial transfer ORtotal transfer (Article 20 Authorization Regulation) * Transfer of assets other than those categorized as “allocated resources” → no restriction.

12. II. M & A Transactions in Telecommunications Sector 2.3 Transfer of Licenses A.Concession Agreement * Fixed Voice Concession Agreement: During term of agreement, TT is prohibited from transferring its concession, and its rights and liabilities thereunder. *GSM Concession Agreements: Transfer of Concession Agreement is possible, subject to approval of ITC Authority + Council of State affirmative opinion (eg. Telsim GSM Concession Agreement’s transfer to Vodafone) *Authorization Regulation Prohibition: Transfer of concession agreement to legal entity (or its group companies) engaged in the same services and infrastructure is not allowed. B.Notification/ Right to Use * Transfer of Authorization: Possible, subject to approval of ITC Authority.

13. III.Role of Regulatory Actors In line with Law No 5189: ITC Authority is entitled to review and/or investigate practices in breach of market competition upon complaints or on its own will (sua sponte) & take necessary precautions. For m&a’s, it should also take into account market conditions. Competition Board initially takes into consideration, opinion and practices of ITC Authority before decision making in telecoms sector (Article 7, Law No 5189) Council of State (Danıştay) reviews and opines on revised drafts of Concession Agreements reflecting relevant transfer

14. III.Role of Regulatory Actors As per Law on Protection of Competition; Competition Board approval required if market shares of legal entities party to M&A deals exceeds 25% of relevant product market or total annual revenues of such exceeds 25,000,000 TL; Competition Board examines and evaluates: * relevant product market: clarifying services provided (whether type of services may replace each other in terms of demands & expectations, whether provision of services require separate licenses from ITC Authority, are taken into consideration) * relevant geographical market : clarifying geographical region (existence of factor/s resulting regional differentiation in competition conditions in Turkey) * relevant product market shares of companies party to M&A M&A transactions shall not result in; * creation or strengthening of a dominant position in the relevant market * strengthen dominant position in a way significantly decreasing competition in the relevant market

15. III.Role of Regulatory Actors CA Approval DateM&A TransactionCA Decision 27 March 2008Acquisition of 100% shares of Borusan Telekom by Dhanus Technologies Limited Approved 26 July 2007Transfer of 50%shares of A-Tel Pazarlama held by Yapı Kredi Bankası to Turkcell Approved 11 July 2007Long term (10 years) leasing of Istanbul-Bulgaria fiber optic cables by Turk Telecom from TEİAŞ Approved 24 August 2006Alfa Telecom’s entitling common control rights in Çukurova Telecom and its subsidiaries, Turkcell Holding, Turkcell İletişim, Intercon Danışmanlık and Cukurova Telecom International Conditional Approval 26 January 2006Acquisition of Telsim by Vodafone through TMSFApproved 18 December 2003Merger of IŞTIM Telekomunikasyon and Aycell Haberleşme under TT İletişim Approved

16. Teşekkürler Senem İşmen Tel: +90 (212) 310 18 18 Fax: +90 (212) 310 18 99 E-mail: sismen@herguner.av.tr