Turkey's Got Talent
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Turkey has increased its billionaires by 50% in the same time it has taken Warren Buffett to raise a similar amount in corporate welfare from US taxpayers. Despite the last several years of global financial angst, Istanbul is currently home to 38 billionaires (ranked seventh worldwide), none of whom are anchored to the oil curse like the majority of their neighboring billionaires, nor are they slaves to the yo-yo cash flow of the revolving tech crowd back in the US (who seem to be so bereft of ideas that they are investing billions in a Russian high school year book scam).
Meanwhile, two ancient (by US standards) and iconic "American" brands, Coca-Cola (NYSE: KO) and Western Union (NYSE: WU), are being run successfully by Turkish emigres – and, like many of Turkey's leaders, they refined their craft at home in the domestic market as well as with time spent abroad. In addition to other hardships, Turkish expat executives have had to endure food that would make the most stoic Turk weep for their superior cuisine back in Anatolia. (It is no coincidence that the modern "celebrity chef" phenomenon was kicked off by a Forbes columnist based in Istanbul).
Mukhtar Kent, CEO of Coca-Cola, is symbolic in many ways of Turkey's rise. After studying in the Turkish heartland and abroad, he worked his way up in the local Coke affiliate until he ran it. Then, which is a disheartening trend for many (in Turkey and other countries like the UK), he moved the corporate headquarters from a mid-sized city (Izmir) to the megalopolis of Istanbul. He then led Coke's efforts to penetrate Central Asia (which was part of the US-encouraged effort by then President Ozal to create tangible links with their Turkic cousins still languishing under Soviet management). His success adapting Coke in transitional economies landed him the job overseeing all-things Coke from the "Alps to the Himalayas" (pretty much any country ever occupied in the last three thousand years by Turkic peoples).
Afterwards, he returned to Turkey to whip Andolu Group's Efes brewery (ISE: AEFES) into shape, and in less than a decade he had them operating on an even larger scale than the businesses he oversaw for Coke. (And it's not always the easiest thing to market a Turkish beer brand in societies where Turks and alcohol are about as popular as the kosher K.) Coke, one of the savviest self-sustaining institutions in global corporate history, then snatched him up where he eventually became the reigning sultan of soda.
Western Union's CEO (and former professional basketballer), Hikmet Ersek, has only held the top spot for the last few years (though he had spent over a decade in management with them before getting the top spot). Ersek and his team were able to arrest the iconic American company's steep slide at the beginning of the recession. The company has also continued to defy analysts that confuse Western Union with predatory pay day loan outfits, and believe that money transfers are as dead as the pony express and carrier pigeons, or that the ATM card has magically solved all the problems associated with individual-level transfers. Under Ersek's leadership, Western Union has continued to diversify its activities into various transnational ventures and subsidiaries with cross-border expertise.
Taking a page from the Turkish Alamanci/Gastarbeiter experiences, Western Union is focusing on meeting the needs of its migrant worker core. Contrary to popular belief, remittances are not just limited to supporting basic needs back home, but are also the most reliable vector for capital needed to start new businesses and construction in emerging markets. Moreover, misguided anti-terrorism laws the world over have made a once simple transaction increasingly difficult and costly for less lean enterprises to achieve.
Surreya Ciliv, a former Microsoft executive, and CEO of Turkcell (NYSE: TKC), is also of particular interest to investors. He has managed to hold the company together despite the company's dueling owners (whose multinational composition has resulted in battles being waged in jurisdictions around the world). Ciliv's team has driven the company's success while the share price and dividend have been held hostage by the directors' votes. Nevertheless, Turkcell has become a great showcase for the maturing of the Turkish economy, and has demonstrated how the country is capable of facilitating solutions to corporate conundrums and is actively working to improve governance nationwide.
The Turkcell board of directors crisis in many ways has made it the anti-Hewlett-Packard. While HP's board has proven itself repeatedly to be a morass of talentless, petty hacks that have set their company adrift, the real problem for Turkcell is that all its board contestants have shown themselves to be excellent directors that have worked to shield the company's operations from their prolonged struggle over fundamental issues. In addition to winning awards for corporate transparency through out the fight, Turkcell executives have been allowed to guide the mobile operator's successful expansions (with relatively little interference by board gamesmanship like at HP). While losing ground in Ukraine, the firm has more than made up for its lackluster performance there (relative to the two top operators in that market) by stepping up its efforts in its other regions and announcing a 56% net profit in Q1 earlier this month. For investors only interested in short-term dividends, Turkcell is not their bag, but in the long term Turkcell under Ciliv has shown itself capable of carrying on despite problems that would break more established enterprises.
As the board dispute comes (effectively) to a conclusion, it will be interesting to see how Turkcell handles the $4.2 billion lawsuit it brought in a US court against South Africa's MTN over Iranian licenses. More than anything it will indicate which countries' national champions are shaping up to be the most nimble in the battle to dominate emerging markets and their explosive growth in the telecommunications sector.
Coca-Cola, Western Union, and Turkcell are all easily accessible to the American investor -- unfortunately more significant exposure to Turks and Turkey is currently limited to funds managed by MSCI, such as the Turkey Investable Market Index Fund (NYSEMKT: TUR), and Morgan Stanley's Turkish Investment Fund (NYSE: TKF), neither of which are positioned to capture the major areas of future growth in Turkey. Moreover, though Turkcell is an integral part of all the currently traded Turkish funds (averaging 5% of each funds' holdings), in the short term the funds are too dependent on financial stocks.
Just as Turkey's global talent has proven itself in a range of industries, investors should aim for opportunities that truly capitalize on the country's highly diversified economy. New York-based fund managers should follow Turkcell's lead and devise ways of becoming involved in a range of industries and sectors in the Turkish economy.
Nick Slepko has no position in any company mentioned here at the time of publication. The Motley Fool owns shares of The Coca-Cola Company. Motley Fool newsletter services recommend The Coca-Cola Company and Western Union. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.