ST is going ahead with investments regardless of privatisation delays.photo: TASR
An injunction issued on October 26 by Bratislava District I Court Judge Taňa Koprdová has blocked the Economy Ministry from handling its 100% stake in state telecom monopoly Slovenské Telekomunikácie (ST). The ruling puts the cabinet's plans to privatise a 51% stake in ST on indefinite hold, and threatens to further delay the already drawn-out process of selling the firm to a strategic investor.
"I don't want to start a panic, but I really see the situation as very bad," said ST Director Emil Hubinák in an interview with the daily paper Sme on October 27. "I don't think it's likely that we will privatise [ST] this year."
The injunction was issued as the result of a suit filed in 1996 by the Austrian CDI radio station. CDI was denied a license to transmit its signal on Slovak territory that year. "I have to say it was an incompetent decision by the court," said Hubinák, adding that he expected an appeal filed with the Bratislava Regional Court would result in a reversal of the injunction. "CDI should have sued Slovak Radio, not us. But even if the higher court does overrule the injunction, it may not do this in a reasonable time frame. It's a pretty serious situation."
The court ruling is only the latest in a series of hurdles the ST sale has faced. Cabinet had originally planned to find an investor for ST by the end of September, with entry to take place by the end of December, 1999. However, the government's inability to agree on the size of the package to be sold, as well as technical hold ups in the preparation of a privatisation strategy, have delayed final approval of the sale.
On October 21, the cabinet was supposed to have discussed a plan to sell ST, which had been submitted by an advisory consortium led by Deutsche Bank. Discussion was postponed once again until October 28.
Milan Luknár, director of the telecom division at the Telecom, Post and Transport Ministry, said he now doubted whether ST would be sold within the next six months. "Optimists are saying we can reach a deadline of March, 1999 for entry of an investor. But realists say this is not possible," Luknár told The Slovak Spectator on October 28.
As time passes with no decision on the ST sale, telecom professionals warn that the eventual sale price of even a majority stake in ST is falling. The telecom company is set to lose its monopoly on fixed line operations in Slovakia as of January 1, 2003, leaving little time for the restructuring that any potential investor would have to push through, and making investment in ST a steadily less attractive option.
The telecom giant is also being forced to go ahead with investment decisions that may affect a future strategic investor. In September, for example, ST called a tender to select a company which would install a new integrated economic system at ST. According to ST's Product and Services Manager Pavol Bojňanský, the system is needed to update ST's financial record keeping, accounting and client billing systems.
According to data published in the Slovak daily paper Pravda, the new system will cost some 300 to 500 million Slovak crowns to install. Interested parties had until October 11 to submit bids, and installation of the system is set to begin November 1.
Hubinák told Pravda that the integration system represented the beginning of restructuring of the state-owned giant. "We won't wait for an investor on this," said Hubinák. "We want to launch a system that is standard in Europe. As far as software goes, the companies involved will most likely be Oracle and SAP."
ST Financial Manager Igor Chochoľ said that without a new integrated economic system, the Telecom Ministry could expect the value of any stake it would sell in ST to a strategic investor to fall by about two billion crowns.
The firm which provided these services to ST in the past, the Canadian CMiC, is not expected to get the new contract. Hubinák said that the contract between ST and CMiC had been signed under the previous Mečiar government, and was now considered disadvantageous by ST's new management. ST was currently trying to get out of its contract with CMiC, either through the courts or by an out-of-court settlement.
Bojňanský said that the integrated financial system investment, as well as other investments scheduled for 2000, would not be affected by whether the firm was sold to a strategic investor. But he said cabinet members should be concerned with the effect of delays on the price a stake in ST would fetch. "The less time investors have to prepare for 2003, the less money they will offer," he said.
