LONDON -(Dow Jones)- Vodafone Group said Tuesday that it has agreed to acquire Telsim, the number two mobile operator in Turkey, from the Turkish Savings Deposit and Investment Fund ("SDIF") for a consideration of US$4.55bn.

Arun Sarin, Chief Executive of Vodafone, said: "With a larger population than every European country except Germany, and a penetration level of approximately 53%, the Turkish market represents a major growth opportunity."

In addition to the consideration price, Vodafone will be required to pay $0.4bn of VAT which will be recoverable against Telsim's future VAT liabilities. Vodafone expects to recover this payment over the short to medium term and this has been included in Vodafone's valuation of Telsim.

The transaction is subject to approval from the SDIF Board and Turkish regulatory, legal and competition authorities. Vodafone expects the transaction to close in the first quarter of calendar year 2006.

Vodafone intends to make a significant investment in the operations and network of Telsim to deliver a superior product and service offering to the Turkish market. Vodafone expects that over the short term Telsim will require approximately US$1bn of additional funding.

The acquisition is expected to enhance Vodafone's revenue and EBITDA growth profile, however Vodafone expects Telsim to make net losses in the short to medium term as it invests in the network, building scale and a stronger customer and brand proposition.

Consequently Vodafone expects the transaction to be dilutive to adjusted earnings per share in the short to medium term. The transaction is not expected to impact Vodafone's share purchase programme and is not expected to impact Vodafone's credit ratings.

Cool, no doubt Vodafone wanted to add to their network portfolio especially after they sold Vodafone Sweden.

Ummm, read what I said on another thread about shareholders whingeing

It looks like they've swapped a saturated market for one they expect to grow. Maybe the biggest growth market recently was Iraq, where mobile ownership has gone from 5% to 62% - looks like an investment opportunity missed ...

I agree with Andy's analysis.
Regarding Iraq, I think Vodafone just didn't want to invest directly in such a risky country; instead, they let their Kuwait partner company MTC do the investment in the local company Atheer telecom.
On the other side, Turkey is a bigger market and (hopefully) safe enough to invest directly in it.