Банкеръ Weekly



The consecutive episode of the BTC deal began on Monday (May 12), when fulfilling the recommendation of its Supervisory Board of May 7 the Privatisation Agency (PA) invited for negotiations the consortium between Koc Holding and Turk Telecom - the candidate buyer that was ranked second in the contest for the purchase of the Bulgarian Telecommunications Company. However, the decision for resuming the negotiations was made at last Saturday's meeting of the Cabinet when (according to inofficial information) PM Simeon Saxe-Coburg Gotha persobally lobbied for Koc Holding. The invited candidate buyers refused any comments, but the Turkish press published their statement, saying they would mobilize all their resources to finalize the tender with the most expedient terms for the BTC and Bulgaria from social, technical, and economic point of view.The consortium was also officially supported by the Cabinet in Ankara through the Turkish Foreign Minister Abdullah Gul. During his visit to Bulgaria he said: We are very much interested in BTC's privatisation. Our company placed a better offer and a higher price. In front of the Bulgarian media the US Ambassador in Sofia H.E. James Pardew expressed his disappointment with the refusal to sell the telecom to the American candidate buyer Advent, diplomatically specifying that the effect will be evaluated in the offices of US companies and not in those of the Government in Washington D.C.. At a boisterous press conference on Wednesday (May 14) the rejected candidate buyer Viva Ventures (which is still wholly onwed by the US fund) pointed out that the decision of PA's Supervisory Board was made due to political, rather than the publicly announced motives. The representatives of Viva Ventures said the company's lawyers would file a claim to the Supreme Administrative Court (SAC) through the PA. PA's management will redirect the claim to the SAC. The claim might be both against the decision of PA's Supervisory Board of May 7 and against PA's decision to begin negotiations with the Turkish consortium. Afterwards the scenario may develop in two directions. Receiving the claim the supreme magistrates should decide if they would initiate legal proceedings or reject it. If the second scenario is chosen, the procedure for BTC's sale will continue according to the well-known rules. The Turkish consortium will have to renew the validity of its offer and its bank guarantee for the deal, amounting to EUR3MN; and the PA will have to present a schedule for holding the negotiations and set a deadline for their completion. However, the more probable development is that the SAC initiates the consecutive lawsuit against the telecom's privatisation. Jurists are almost unanimous that the divestment deal will be suspended again.Only about ten days ago everything regarding BTC's sale seemed very well arranged and almost settled. All official announcements claimed (and they still do) that 65% of the telecom's shares would be put up for sale. But in addition, the buyer will also acquire two quite valuable licences - for a third local GSM-operator, and for digital TV. The future owner will also get BTC's exclusive rights, which most of the analysts and observers of the deal seem to forget. And these rights guarantee an almost entire monopoly of the telecom on the market (not only for the ordinary telephony, but also for the telecommunication links and transition, and for providing technological networks and services). Some of these guarantees are included in the provisions for extending the term of BTC's monopoly, underlying in the draft bill for the new telecommunications law. Others have been included in the macroframe, agreed with the European Union when closing the Telecommunications Chapter in the pre-accession negotiations, or are a function of the Bulgarian telecom market and the distribution of parts in it. The market segment that will be sold together with BTC also has its price, which should be specified in advance, as the practice everywhere in the world is. It is only in Bulgaria that MPs from the ruling majority, ministers and officials, claim that the telecom costs as much as the candidate buyer offers. It is still more strange that nobody paid any attention to the evaluation that was made public. Rumours say that it was orderd by the Premier. According to that evaluation the current market price for 65% of BTC's capital is between EUR361-404MN. This marge can be more or less disputable, but the purchase price of EUR210MN, offered by the rejected candidate buyer Viva Ventures, is obviously way down from it. The practice in the divestment of national telecoms is to specify the strategy for each of the following three years at least (the number of new telephones line to be established and the number of telephones respectively, the replacement of outdated analog telecommunication systems with digital ones, the installation of optic fibre cables at definite places). The commitments are entered and fixed in the documents for the deal and are usually included as an obligatory terms during the sale itself. But there are no such terms in the case of BTC's divestment.Another obligation of BTC's future owner, which the PA should set as a condition in the very beginning of the sale procedures, are the stages of digitalizing and modernizing the telecommunicational infrastructure. According to financiers and telecom experts, in the 2002-2004 period the BTC will need investments of at least EUR450MN for that purpose. They allow Bulgaria to fulfill the commitments in that sphere, which the country has undertaken to the EU, and the telecom itself will be able to guarantee its competitiveness on the liberalized domestic market. In fact, each of the last five years the BTC had been investing between BGN200-300MN in the modernization of its network. BGN310MN has been projecetd in the business plan for 2003. This amount is almost 8-fold higher that the EUR21.5MN, projected for the purpose in the investment plan of the rejected buyer Advent.The prices of ordinary telephone service will certainly be hiked, independently if the telecom is sold or remains state-owned. But it's important how much prices will be hiked and at what intervals that will be done. The price increase has been postponed for months on end. The inofficially announced term for the price hike is now June 1, 2003. However, no expert ventures to say what the new levels will be and how they will be formed.

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