Turkish tobacco sale abandoned

Tekel produces up to 115bn cigarettes every year

Turkey is dropping plans to sell the tobacco arm of state monopoly Tekel, the privatisation agency has said.

The leading $1.15bn (£0.69bn) bid by Japan Tobacco International was deemed too far below government expectations.

Turkey wants to raise $4bn in asset sales next year, and was expecting up to $3bn from the Tekel disposal.

The abandoned privatisation is a setback to flagship reforms undertaken as part of a $16bn loan agreement with the International Monetary Fund.

Sigara Sanayi Isletmeleri, Tekel's cigarette arm, has a more than 50% share of what is the sixth largest cigarette market in the world.

Attractive market

Tekel, which also trades in alcohol and salt, earned revenue of $2.8bn last year, up to 77% of which was generated by the cigarette division.

The proposed sale was at first deemed an attractive proposition for international bidders facing saturation in many large western markets.

But the global giants are thought to have lowered their bids because of perceived problems with regulation and Turkey's operating environment.

The major players such as Philip Morris and Japan Tobacco International are already active in the Turkish market, a fact that could have raised competition queries.

Reform

The Turkish government is under pressure from international donors to bring state finances into order after a currency crisis last year.

Lenders have called on authorities to raise revenues through wholesale privatisation, although sell-offs have proved politically sensitive in the past.