British American Tobacco (BAT) is mulling over a bid worth up to $1 billion (£510 million) for Tekel, Turkey’s state-owned tobacco company, which could be put up for sale as early as next month.

Turkey’s Competition Board approved the privatisation of Tekel last week, and officials said that the tender could be formally announced next month, assuming it won government approval.

A spokesman for BAT, the world’s second-largest tobacco company, said that it would be interested in buying Tekel depending on the price and the exact terms of the sale.

Turkey is the world’s seventh-largest cigarette market, with about 100 billion cigarettes smoked every year. Analysts say that the privatisation of Tekel could fetch about $1 billion, depending on its structure.

Paul Adams, BAT’s chief executive, recently told The Times: “If the Turkish Government puts Tekel up for sale, we would take a look at it.” BAT has an 8 per cent share of the Turkish cigarette market.

Other possible bidders include Imperial Tobacco, Japan Tobacco International (JTI) and Spain’s Altadis.

Philip Morris International, the owner of Marlboro, is the market leader in Turkey with a 42 per cent share. It is likely to be excluded from bidding on competition grounds.

However, to judge by past performance, the privatisation of Tekel is unlikely to proceed smoothly. The Turkish Government has tried to sell it twice before. In 2003 JTI offered $1.15 billion, but the Government cancelled the sale, saying that the bid was unsatisfactory.

No bids were received in the next attempt in 2004 because of restrictions imposed, including keeping factories open and using set proportions of Turk-ish-grown tobacco.

When it was first slated for privatisation in 2001, Tekel’s share of the domestic cigarette market was about 60 per cent, but this has now fallen to about 40 per cent. Officials fear that any further delay would devalue the company even more.

There is also the looming problem of an expected 10 per cent tax increase on cigarettes, which the Government wants for budgetary reasons and the European Union wants for the purposes of harmonisation if Turkey joins the EU.

Privatisation officials oppose the move and Recep Tayyip Erdogan, the Prime Minister, has yet to decide on the timing.

The Government had told the International Monetary Fund that it intended to priva-tise Tekel this year.

Kemal Unakitan, the Finance Minister, said recently that he was determined that companies such as Tekel and the state-owned bank Halk-bank would be privatised this year. He rejected claims that 2007 would be a lost year because of presidential elections in May and parliamentary polls due by November.

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