Банкеръ Weekly

Briefs

BTC'S MONEY - ALREADY ON ITS WAY TO BE SPENT

Governors must get rid of the Bulgarian Telecommunications Company (BTC) at any rate. They need quick and powerful financial injection so as to pay up the last tranches on the contracts for supply of digital telephone exchanges, signed in 2000 - 2001. They also need money for the new investment projects launched late this summer. Otherwise they face the actual risk not only to be accused of incompetence, short-sightedness and utter ignorance of the world telecommunications, but also to get acquainted with some other institutions working mainly with the Criminal Procedures Code. The vision of temptingly high commissions urged many high-ranking authorities to burden the poor company with exaggerated investment commitments.All these circumstances make it necessary for the company to be sold during the current divestment procedure. This must happen regardless of the far too humble sums, offered by candidate-buyers, regardless of the proposed investments (including the EUR50MN by which the future owner should increase BTC's capital) and of all the other requirements accompanying the deal. There is yet another option (perhaps slightly more dignified) - the company to be launched urgent foreign credit and its management to be passed to a foreign team. Thus all investment payments will be carried out and BTC's management will be led according to clear parametres - the team's remuneration, undertaken commitments for the future financial performance of the company and for its structural and technological updating.Whatever approach chosen, it must be preceded by one requirement - huge sums to enter the accounts of the Bulgarian telecom and quickly at that. The most urgently needed money varies around at least EUR50MN which is far less than the EUR100-200MN, mentioned by Transport Minister Plamen Petrov as possible credit from the International Finance Corporation (part of the World Bank Group) and by the European Bank for Reconstruction and Development (EBRD).The hunger for investments became more than evident in early-September when the inofficial section of the Official Gazette was overflowed by announcements for public procurement tenders. Only one of them (the one for construction of an optic fibre cable network in Northern and Southern Bulgaria, published in Issue 85, dated September 5) can easily suck in almost all of the urgently needed millions. This order's value is preestimated at EUR41MN at least. Only the price of the optic fibre cable ranges between EUR14MN and EUR15MN. If we add the money for reconstruction and modernization of the company's buildings in 35 municipalities of the Varna region; the money needed by eight relay stations in the country (these announcements appeared in the same issue of the Official Gazette) and the money for construction of the new digital radio-relaying systems (announced on September 13 in Issue 87 of the Official Gazette), the situation gets much clearer. The BANKER weekly was informed that in the last few weeks BTC's potential buyers have placed a number of questions concerning those investments. This is one of the explanations why on Tuesday (September 24) they offered such insultingly low prices for BTC. As the BANKER weekly predicted ten days ago, there were only two offers for the national telecommunication - that of the American investment fund Advent through the specially registered for the deal affiliate Austrian company Viva Ventures and of the Turkish Koc Holding in a consortium with Turk Telecom. As expected the American fund's offer (EUR200MN for 65% of the capital) was higher than the Turkish one (EUR185MN). The Americans evaluated BTC's overall capital to slightly over EUR242.8MN while Bulgaria's southern neighbours calculated it to EUR226.1MN. All the high-ranking government authorities, the experts and the public who attended the official offers' opening seemed unpleasantly surprised. The Minister of Transport and Telecommunications Plamen Petrov left the hall before the candidates' offers were publicly announced. Finance Minister Milen Velchev refused any comments. I expected the offers to be by 50-80% higher and without any conditions attached, admitted Plamen Petrov a day later.It remained unclear whether Minister Petrov's expectations were based on any preliminary information. The last evaluation of BTC, made this spring by Deutsche Bank, was EUR350MN. Adding the widely spread official statements about the telecom's clumsy structure, its insufficient digitalization and about those announcements in the Official Gazette, the offered price appears quite understandable. Because it's inadmissible for both Minister Plamen Petrov and the Privatisation Agency's Head Apostol Apostolov to qualify BTC as one of the most outdated telecoms in Southeastern Europe and at the same time expect a good price for it from foreign investors. Especially if much of the expected revenues have been spent in advance.It is also impossible to expect offers without any conditions at a time when all the legal basis of the sector can be found only as a project on the web-site of the Ministry of Transport and Telecommunications.

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