Türk Telekom is a formerly state-owned Turkish telecommunications and broadband company. It has been the major communications network provider in the country since 1840 and now delivers countrywide services for fixed-line and mobile telephony, internet, digital television and Wi-Fi. In 1995, telecoms services split off from Posta Telgraf Telefon into the newly founded Türk Telekom which was privatised not long after. Today Türk Telekom is 55%-owned by Oger Telekomünikasyon, 30% by the Turkish Treasury with the remaining 15% of shares being publicly held. Its shares were first listed on the Istanbul Stock Exchange in 2008. Consolidated revenues for the group in 2013 reached a record TRY13.2 billion (€4.5 billion), up 3.9% on 2012’s TRY12.7 billion results.

From heavy industry to the high tech world of telecoms, Tamer Karabulut, Head of Treasury Operations, Türk Telekom, has made some significant steps in his career. He is now part-way through a major programme to update, integrate and automate treasury and finance operations. He talks to Treasury Today about his move up the career ladder, military service and law studies.

Many professionals either stay in one field or take small progressive steps from one industry to another, building a career as they go. Tamer Karabulut, Head of Treasury Operations at Türk Telekom took one significant leap from heavy industry into modern communications technology via a Bachelor’s degree in Economics and then Law, and mixed in a spell in the Turkish military. It has been an accumulation of experience that has clearly paid dividends.

With his first move, in 2005, Karabulut took on a role in the corporate finance department of Turkey-based global iron and steel producer, Erdemir. As part of a team of four, he prepared market analyst reports but soon moved into the long-term finance section, working for six months on a bond-issuance project. His work here was interrupted by mandatory service in the Turkish military. Following discharge from the service in 2007, Karabulut was contacted by Türk Telekom and offered a position in its nascent treasury department as a treasury specialist, starting in October of that year.

“There is room for further efficiency, for which we need further automation,” he admits. “Sometimes it takes too long to deal with the daily operations.”

He stepped immediately into a project to carve out a treasury function from the existing operations department which at that point focused almost exclusively on collections and payments. “There was no treasury department; only the basic functions within operations,” recalls, Karabulut. Having now found his way in this large business, to help build out treasury functionality he became involved in the implementation of SAP’s Finance module, a project that commenced in 2009. This was intended to provide a solid base for all financial functions including operations, finance, insurance, hedging and fund management.

With Türk Telekom tackling the demands of long-term finance especially in relation to major capital expenditure (CAPEX) programme, the firm’s search for funding for its investments saw him get closely involved with national and international banks; he actively took part in major CAPEX financing projects with a list of international providers such as China Construction Bank and China Development Bank, neither of which have branches in Turkey (of which more later).

A point of law

The search for capital also saw Karabulut work with an assortment of bodies such as ECAs (Export Credit Agencies) and international financial institutions, the latter including the European Bank for Reconstruction and Development (EBRD) and European Investment Bank (EIB). It was this work that spurred him on to study for a law degree at İstanbul Üniversitesi. “It was necessary to better understand the loan agreements and the structure of the loans,” he recalls.

Clearly having established solid ground from the outset and now seeking a new financial experience, Karabulut was promoted in February 2012 to the position of Head of Treasury Operations. In this role he deals with a broad sweep of treasury functions including fundamentals such as collections and payments, cash management and the operational and documentary side of corporate loans.

Today’s treasury operations department consists of 12 staff. With a vast amount of paperwork still in the system, Karabulut is signing on average almost 50 transaction orders to banks every day. “There is room for further efficiency, for which we need further automation,” he admits. “Sometimes it takes too long to deal with the daily operations.”

The SAP project to standardise and automate processes in Türk Telekom is now five years old and there are still elements to be completed; this is not unusual for a SAP project, encompassing as it does a multitude of functional possibilities. As the company grows (organically and by acquisition) treasury is playing catch-up. Over the next five years, a number of other IT projects will be rolled out.

A new treasury management system (TMS) might be implemented. “A TRM module has already been installed but it is a generic system and not sufficiently flexible to serve our increasing and more sophisticated needs,” explains Karabulut. “We need a tailored system.”

Bringing order to operations

Once the structure is finalised and the system is in place the various financial functions will be aligned in terms of risk mitigation. With the treasury IT systems in transition, all finance departments currently require a hands-on approach to deliver automation and standardisation. “This will put us in a position where we can strategically manage those functions going forward,” says Karabulut.

After the transition, when the finance functions are aligned through technology, he says that the treasury department will be in a position to help other departments within the business better understand the financial nature of new products. By integrating closer with the banks, the intention is to fully leverage customer and supplier finance solutions, for example. “By the end of 2014, we plan to be in that position.”

The need for proper risk management has been instilled inthe operations of many Turkish companies. In 2001 Turkey suffered its own financial crisis. Throughout the 1980s and 1990s, the country relied heavily on foreign investment for economic growth. In trying to sustain that growth the government issued many high yield bonds and the Turkish banks sought them out as their primary investment tool. As instability set in, foreign investors withdrew and the economy went into meltdown with stock crashing, interest rates reaching 3,000% and the Turkish central bank losing $5 billion of its reserves. The government, says Karabulut, forced essential changes on the banking system, notably around control mechanisms. With measures already in place, he comments that the 2008 global financial crisis did not have “too much of an impact” on the Turkish banks.

Managing tough times

Türk Telekom’s own position in the ensuing maelstrom had been influenced by a decision in 2007 to expand its bank portfolio; it had been working with just three domestic institutions up to that point. One of the first moves of the new treasury department that Karabulut had joined was to increase the number of banks it dealt with. Over a five year period it has built up that portfolio and is currently working with over 40 banks – 27 local players plus international banks spread across China, the US, Europe and the Middle East.

Each bank has been carefully selected, using a raft of information from sources such as ratings agencies, local banking regulatory authorities and market news to analyse the position of each one. Aside from the high credit quality of the company, due diligence and diversification helped to protect it from the worst of the global financial crisis, with China and the Middle Eastern operations faring much better than European and US banks. In addition, he notes, the concept of ‘flight to quality’ that the banks and financial institutions espoused saw them preferring to place their exposure with financially robust companies. This gave Türk Telekom a preferred status. “We have been witnessing a trend that most of the international banks and financial institutions have an increasing appetite to work with us.”

Keeping afloat

Türk Telekom pursues a strategy of diversification under its funding strategy, with special emphasis on ECAs and IFIs because of their cost and longer-term nature. Procurement from major suppliers to Türk Telekom (such as Ericsson, Alcatel, Huawei, ZTE) is aided by ECAs which offer state-sponsored export credit (some may view it as an export subsidy but the positive effect is undeniable).

Türk Telekom maintains large credit lines with Turkish banks, under which it may use short-term loans for its daily cash flow requirements. It may use bridge financing in case long-term financing processes are more drawn out than expected, (commonplace if the counterparty is a state-owned financial institution).

Türk Telekom’s financial investment policy is highly conservative, only investing in term-deposits with the banks domiciled in Turkey. “We don’t use any exotic type of investment; we definitely avoid risky ventures.”

“We don’t use any exotic type of investment; we definitely avoid risky ventures.”

The corporate finance department is currently working on a new debt capital markets (DCM) project and has already made an application to Turkey’s Capital Markets Board. Türk Telekom has plans to issue paper with a maximum maturity of ten years. It intends to raise up to $1 billion in its first visit to the international markets with the issuance likely to be run by Barclays Bank, BNP Paribas, Emirates NBD Capital, J.P. Morgan and Standard Chartered.

Making choices

Although the financial crisis didn’t dramatically affect Türk Telekom’s funding base, Karabulut reports that FX volatility has an impact on the balance sheet although the negative impact remains largely unrealised due to the amortising nature of its hard currency short position. For trading, it uses data feeds from Reuters, SuperDerivatives and Bloomberg, using the latter for FX spot deals and SuperDerivatives for global derivatives pricing.

“We are working through this transition period, trying to make all the changes in line with all the regulations and design a treasury management system to meet all our needs, not just for a few years but many years to come.”

As a telecoms firm, collections plays a vital role in Türk Telekom’s operations. Direct debit is the favoured model used by its 1,000 dealers and 300 offices all over Turkey but customers are also able to pay through a variety of banking channels (including ATMs and mobile). The choice suits the consumer but Karabulut says that from a treasury perspective “the vast number of payments systems requires particular management for it”. The necessary choice of channels means Türk Telekom has composed an integrated collections and settlements system, connecting all dealers, offices and banks.

Sitting at the crossroads of Europe and Asia, Turkey is seeking accession to European Union. Türk Telekom has customers in Europe already but as far as SEPA is concerned, Karabulut says it is something to watch for now, perhaps looking to form an official policy in a few years’ time.

Of more immediate concern for Karabulut, as treasury operations head, is the ongoing automation project and the roll-out of Türk Telekom’s integrated IT plans. “We are working through this transition period, trying to make all the changes in line with all the regulations and design a treasury management system to meet all our needs, not just for a few years but many years to come.” In terms of his own approach to treasury, it will be another major step in a new direction – and one which will similarly yield positive results.