Банкеръ Weekly

Briefs

THE CARTEL OF PRIVATE COMMUTER LINES IN SOFIA

Facilitation or curse are the private commuter lines in Sofia for its citizens? Many people have been asking this question for more than 15 years and there seems to be no unambiguous answer. The overcrowded minibuses and the risky manoeuvres of the drivers now have their place not only in the urban folklore, but also in a song of the rap band Upsurt. A theatre play has also been written for them. However, if we look on the practical side of the things, private commuter lines are still a very lucrative business. Without any explicable reason, the municipality transferred the right for operating the lines to several players for next to nothing in 2003. Their number does not exceed half a dozen and they are very tightly connected between each other so we can say that there is a cartel on this market in Sofia.
According to data provided by the Sofia City Council to the BANKER weekly, a total of
49 lines have been approved
in the city of almost two million, but only 40 of them are being serviced. Two companies, EG-6 Ltd. and Sisi-T, operate nine of them each (which makes them the largest transporting firms in the sector). The check at Daxi information database showed that the first one is managed by Hristo Kalein, who ones 4.2% of its capital. He is also in the management of Roni 59 - KaleinCo, Roni 59 - Hristo Kalein and Evro Grup 6 where he controls 50%, 100% and 7.1% share respectively. He is also a member of the directors' board of the Union of private commuter line operators.
The largest share in EG-6 is held by Nikola Petrov. He is also the only owner of Axel-Nikola Petrov firm trading in car spare parts. Mr. Petrov holds 40% in Make Trans whish is engaged in cargo transportation activities. Another 24% of EG-6 are controlled by El Si Ni 2000, managed by Valentin Veselinchev, who also owns 36% of its capital. EG-6 has another 13 shareholders which together control 36% of the enterprise. Most of them have also shares in Evro Grup 6.
The detailed breakdown of the ownership is not at all purposeless. The in-depth analysis of the BANKER weekly showed that between the
leaders in the segment of private commuter lines
there are very interesting connections.
At first glance, the second company - Sisi-T Ltd. is entirely owned by Stefani Mihailova who manages it together with Krasimir Atanasov. As a matter of fact, the tender for new private commuter line operators in 2003 was won by Sisi-T Stefani Mihailova whose core activity was retail trade in general shops, mainly with food products, beverages and tobacco products. In February 2005, the enterprise transforms itself into single-person limited liability company and in April 2006 it changed name to Sisi-T. Its owner, Stefani Mihailova, also takes part in the management of Bankya 21 and holds 30% of the capital in Direct Transport. What is interesting is that, according to the Daxi e-register, the chairman of the City Council, Andrey Ivanov, from GERB party, also has stakes in these firms. His stake in the first one comes to 80% (the remaining 20% are held by Sofia Municipality) and he also possesses 35-percent share in the second one. A lot more intriguing is another connection: Nikola Petrov, who owns one third of the so-called competitor EG-6, is in fact partnering with Ms. Mihailova in the management of Bankya 21 as well as with Mr. Andrey Ivanov. Thus, it turns out that the good half of the private commuter lines in Sofia (and the most lucrative ones, let us say) are operated by
connected persons.
The other significant player on the maker segment is Karina-SPS. It operates eight commuter lines in the capital and according to Daxi, its management board includes Galina Atanasova, Valeri Yanakiev, Yuri Borisov, Stoyan Zhelev, and Nadya Bozhkova. The last two of them are also in the management of the importer of Peugeot to Bulgaria, Sofia Trans Auto, which on its turn is the owner of a 35-pct-stake in Karina. Another 30% are held by Autopark Transport. However, the most interesting among the owners is Seva Trans, which has the right to operate line No 48 connecting Druzhba II residential district with the New Bulgarian University. It is owned by the former national football team player Emil Kostadinov, who controls 31% in it, followed by the son of the ex-transport minister Wilhelm Kraus, Anton Kraus, (28%) and Stoyne Manolov (28%) who in official registers appears as owner in two dozens of companies engaged in construction, hotel and restaurant services, trade, gambilng, pools, etc. The remaining 13% are held by Valeri Dimitrov Yanakiev.
Among the big players in the segment is also Borex Trans. The company has been linked by the press to the former City Hall counsellor from the Bulgarian Socialist Party, Luybomir Stoichkov. The check at Daxi showed that he was in the management of the company from its setting up in 1999, but in October 2005 he withdrew. Now the owners are Stoyan Krastev Yordanov (50%), Nadezhda Milchova Andreeva (25%) and Dimitrina Vasileva Dimitrova (25%) who are also the managers of Borex Trans.
Ant Farma Ltd. operates five lines, too. The names of its owners, Milcho Antonov (34%), Vasil Vasilev (33%) and Kiril Dimitrov (33%), are not that noticeable, but the company's core activity is much more attractive: trade in pharmaceuticals, medical and orthopaedic products. Antonov, Vasilev and Dimitrov are partners in another company in the same filed of activity - Vadian Pharma - but have obviously decided that the transport business
can offer far better perspectives.
Nov Plamak is a a company that operates two lines - 10 and 31 - that cover the route between Bankya, Zlatnite Mostove and Iliantzi district. According to opinions expressed in Internet forums, people who want to travel in these destinations are a lot more than the number of people the company now handles and additional minibuses seem to be needed. Nov Plamak is managed by Plamen Bonev and Kiril Serafimov who own 48% and 6% shares in the company respectively. The remaining 46% are owned by Mr. Bonev's son - Nenko Bonev.
Trans Service operates only one route - from Slivnitsa Boulevard to Malinnova Dolina district. The company's sole owner is Kosta Iliev, who controls also 100% in Trade Co Group. In 2007 Trans Service tried to take part in the concession of certain bus lines of the Sofia mass transportation. Back then the consortium Sofia Trans have been formed which included also Karat - S and MTK Group. However, the tender for concessions fell through and the joint-venture desintegrated, too.
It is obvious that the
revenue the above mentioned companies
generate should not be underrated. Of course, nobody gives exact figures, but an approximate estimation can be carried out. Approximate, because the different lines are differently busy and some commuter lines have larger intervals between each minibuses and thus they make lower number of tours a day. However, according to information provided by Sofia Municipality, the cars make on average 136 one-way trips for the period from 0600 hours to 2200 hours every day (the approximation encompasses both the busiest lines and the less attractive routes). Assuming that every bus handles 20 passengers per one-way trip (although their number is much higher) at a price of BGN1.50 a ticket, the average daily revenue reaches BGN4,000 per line. The average expenses on fuel a day may come to BGN1,000, but the remaining margin of BGN3,000 is still a good amount of money. The expenses on maintenance and drivers' wages are very difficult to calculate, but even with them, the average daily return per line will not fall lower than BGN2,000. As a matter of fact, whatever the calculations may be the commuter line business in the capital generates monthly profit of BGN2.4MN, which is effectively distributed among three or four companies. Companies do pay fees to the municipality, but according to data received by the BANKER weekly, their extent is - to say the least - symbolic one: BGN50 per month per vehicle. If a company has on average nine minibuses, that would make around BGN450 in fees to the municipality per month.
The problems that are associated with this kind of transportation are also serious ones.
Perhaps
the gravest violation of the law
is that there is almost no financial control on the operators. It is a public secret that drivers of the minibuses prefer not to issue tickets, which save companies a significant resource from taxes. This is not only to the detriment of the state budget, but also to the clients themselves, because in case of an accident it is the ticket that provides them with insurance. This malpractice is not denied even by the Municipality, but its representatives explain that it is a job of the financial ministry to do away with this problem.
The conditions of the buses are also hopeless. There are very few lines operated by truly new and clean minibuses that would have the standard number of seats. Dilapidated vehicles with only five or six seats are a usual picture in Sofia. The remaining seats are usually taken away so that room may be secured for as many standing passengers as possible. All this happens in spite of the fact the the legislation in this respect forbids more then seven standing passengers.
As for the way of driving - this needs a separate page to be commented. All citizens of Sofia know that the most dangerous participants in the heavy traffic are the drivers of commuter minibuses. The problem is that for them, their timetable is more important than the traffic rules. Every passenger in addition they take has a direct influence on their wages, but this is all too often to the detriment of the citizens, whose trip in a minibus like this looks more or less like a roller coaster ride.
The largest problem, however, is the constant transferring of responsibility between institutions. The Sofia Municipality, Finance Ministry, Traffic Police and the State Automobile Inspection Service turn into dumb bystanders of a thriving business whose very roots, as it turns, should be inspected also by the Commission for Protection of the Competition.

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