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Tuesday, 29 January, 2002, 23:43 GMT
Mobile giants sue over Turkish 'rip-off'
A Turkish man using a mobile phone in Taksim Square, Istanbul
Turkey's mobile phone market is shrinking
Nokia and Motorola, the world's two top mobile phone makers, are suing the family which owns a Turkish mobile network for fraud amounting to $3bn.

The two companies say the Uzan family, which owns number two Turkish carrier Telsim, misused money loaned by Nokia and Motorola.

This is not a normal commercial dispute between private parties... It is a premeditated and unlawful attempt by the Uzans to rob both Motorola and Nokia of our assets

Peter Lawson
Motorola general counsel

Telsim has denied the accusations of fraud.

"Motorola's and Nokia's allegations made to the public have no basis neither in fact nor in law," Telsim said in a statement faxed to Reuters.

"Telsim and its shareholders will vigorously defend their legitimate rights and undertake the appropriate steps to bring to light Motorola's and Nokia's unethical and unfounded business behaviour."

Both vendors have been aggressive in what is termed "vendor finance", where a company selling equipment also loans the customer the cash to make the purchase.

Motorola, whose enthusiasm for vendor finance has done its balance sheet no good in the recent downturn, says it loaned over $2bn, while Nokia says it has lent more than $700m.

On this occasion, the loan was secured by pledges of Telsim stock - 66% of the company for Motorola and 7.5% for Nokia.

Diverted funds

According to Nokia and Motorola, the Uzan family took the money and diverted it to other family operations in which neither vendor had a stake.

The firms say that was always the family's intention - thereby constituting fraud.

The family's behaviour has reduced the value of the phone makers' holding to just a third of what was promised, they say.

Both companies are now suing in New York because they say that efforts by themselves - and by the US government on Motorola's behalf - to recover the debt under normal commercial procedures have failed.

Moreover, suing there means they can bring charges of racketeering under the US's anti-mobster Racketeering Influenced and Corrupt Organisations (RICO) act.

That allows them to claim triple damages.

'No other recourse'

"We are taking the unusual step of jointly filing this action because it is clear to both companies that the Uzans had no intention of dealing in good faith with us in an effort to resolve this situation," said Motorola general counsel Peter Lawson.

"This action is in recognition that this is not a normal commercial dispute between private parties.

"It is, rather, a premeditated and unlawful attempt by the Uzans to rob both Motorola and Nokia of our assets."

In the suit, the firms allege that the family has taken steps to avoid repayment - although the family's head, Hakan Uzan, last year offered to pay some of the money owed, as long as there was a long grace period before paying the rest, due to the parlous state of the Turkish economy.

The suit comes at a stressful time for Turkey's four mobile operators. Almost 1.5m subscribers gave up their phones in 2001, according to the transport ministry.

To avoid paying, the suit says, the family resorted to extortion and intimidation, "including issuing threats, filing baseless criminal charges in Turkey... and hacking into Motorola's computer system".

Both companies have already made provisions against the losses.

The family is thought to be the fifth richest in Turkey, with a net worth of about $1.6bn.

See also:

24 Jan 02 | Business
Nokia sets up for big year
23 Jan 02 | Business
Motorola losses mount
11 Dec 01 | Business
Nokia predicts strong growth
31 Aug 01 | Business
Turkey's economy shrinks
05 Oct 00 | Business
Turkey outlines telecoms sell-off
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