How Turkcell built one of the world’s fastest networks
FORTUNE — As the CEO of Turkcell Group, Sureyya Ciliv sits at the helm of one of Europe’s most important telecom giants. He is also a key player in the roaring Turkish economy. (Turkish GDP growth even outpaced China’s earlier this year.) And that has put the 53-year-old executive in the position of offering some guidance to neighbors in the much-troubled Eurozone as well as to stagnating Western powers farther abroad. His idea? Privately funded investment in infrastructure.
Ciliv has the clout to be doling out advice. Since he was made CEO four years ago, Turkcell has grown from 44.9 million subscribers to 61.7 million in Turkey and eight other countries in the region. Ciliv pushed Turkcell into new markets, most recently Germany, while building on positions through its Fintur subsidiary and others. Overall, Turkcell leads the market in Turkey, Kazakhstan, Azerbaijan, Georgia and Northern Cyprus. It also has toeholds in Ukraine, Belarus and Moldova. In an August study, Turkcell’s data download speeds in Turkey for phones on its 3G network were rated the fastest for those of 53 industrial nations — including ones in North America — by telecom giant Ericsson.
Now plugged into his home country’s centers of power, Ciliv spent many years in the United States, graduating from Harvard Business School in 1983 before co-founding an information management solutions company, Novasoft Systems. He left Novasoft in 1997 to head up Microsoft’s (MSFT) operations in Turkey. By 2000, he’d risen to an executive role in worldwide sales and marketing back in Redmond, WA. He’s been CEO of Turkcell, based in Istanbul, since January 2007.
Ciliv’s pitch doesn’t sound so different than something an executive might deliver to investors. “Turkey is something very simple, and yet very, very smart,” Ciliv says, describing his country’s remarkable development. At the center of that progress? Infrastructure projects — and a lot of them. He’s an ardent supporter of building everything from roads to hospitals and, naturally, fiber optics. He ticks off the main values on his fingers: boosting the national economy, driving local businesses and spurring employment. Ciliv is selling the efficacy of so-called build-operate-transfer (BOT) operations.
Americans are most likely to have encountered BOT projects in their cars. The emerging system through which private companies maintain toll roads in some states is a classic BOT model. Private firms get a concession to finance, build and operate the project for a period of time before giving it back to the public. In return, the government turns over otherwise unimproved public assets. Private companies benefit if they can recoup their investment and turn a profit; the government, meanwhile, avoids shelling out public funds. The model can work with many sectors, from the more straightforward, such as bridges, to complex projects like health clinics or data networks. Despite the success of BOT in Turkey, Australia and Japan, adoption in Europe and the United States still lags.
According to Ciliv, the system allows a government to be pro-business and keep its corporations competitive globally, while producing projects that directly help the public. Such tactics then encourage major players such as Turkcell to pursue additional infrastructure as confidence grows. Turkcell’s voice business, for example, is flat, but the company is investing heavily in Turkey’s booming smartphone and high-speed internet markets, where Ciliv’s found more growth. That transition from “Silk Road” to “Fiber Road,” depends on a fiber infrastructure 28,000 kilometers in length and growing, through aggressive investment of hundreds of millions of dollars in BOT projects. Hence Ciliv’s faith.
The company’s fiber optics are a big part of Ciliv’s belief in BOT. Through its subsidiary Turkcell Superonline, the company’s fiber optics now pass through 73 of 81 cities in Turkey. Its 1,000 megabits-per-second capability makes it one of the fastest in the world. Turkcell’s network got a major jolt from a BOT project with the Turkish state in December 2009. The company paid 20.9 million euros to build and lease the fiber optic network of Turkey’s state-owned pipeline company for 15 years, giving it the right of way to 11,280 kilometers of new fiber, half of which is up and running already. The agreement expanded Turkcell’s fiber optic service to new regions, allowed for new cross-border points with neighbors, and also bolstered its existing service by allowing alternative data paths.
Ciliv says that Turkcell got to its position of opportunity by investing aggressively in 2008, when many companies were tightening their belts and hoarding capital in the face of the tumult in the markets. The company has invested over TRY1 billion (about $570 million) into its fiber network infrastructure. Such a commitment to high speed gives Turkcell a competitive advantage, according to longtime telecom expert and independent analyst Jeff Kagan, “a winning move” that keeps Turkcell at the forefront of the global telecom industry’s increasing focus on high speed.
A friendly government and booming economy haven’t meant Ciliv has avoided difficulty. The company’s quarterly earnings, to be released tomorrow, may take a hit due to a devalued Belarussian ruble, according to advance analysts’ reports. What’s more, shareholders TeliaSonera AB from Sweden and Altimo from Russia tried to seize control of the telecom company from the main Turkish shareholder, Cukurova Holding, several weeks ago. Perhaps to help block such a takeover by non-Turks, the Turkish Capital Markets Board announced a new rule requiring Turkish companies to have at least two, or a one-third proportion, of board members be independent.
Not surprisingly, Ciliv was openly pleased by the move, and argues that free float investors such as Lazard want the company to stay Turkish as he does. (More recently, his company scrambled after a devastating Oct. 23 earthquake in eastern Turkey, providing free calls and texts for a month and sending donated supplies to be distributed by its employees on the ground.)
Ciliv admits his Eurozone colleagues, for one, won’t be able to simply copy Turkey’s policies. Ciliv points to the range of nationalities and agendas in the Eurozone as its inherent shortcoming, noting ironically, “I don’t see the simple approach [that] works well in Turkey.”(Ciliv told Fortune this even before Greece pushed other European nations to apoplexy by announcing its bailout-threatening referendum yesterday.) In the U.S., meanwhile, BOT schemes backed by foreign firms may become political mine fields. For his part, Ciliv has no intention of letting Turkcell’s growth slow or ceasing to spread the word on how his company and country do it. His European peers might do well to listen.