Telecom Minister Jozef Macejko was the driving force for selling a 51% stake in ST.photo: TASR
The sale of a 51% stake in the state-owned telecom monopoly Slovenské Telekomunikácie (ST), regarded by analysts as the most important privatisation in Slovak history, has once again hit a snag. The latest delay occurred on November 12 when Telecom Minister Jozef Macejko delayed the publication of an ad announcing the launch of the privatisation process in domestic and foreign media publications.
Stanislav Vanek, the director of the Telecom Ministry's Regulatory Department, said that the publication had been delayed until parliament could approve the general outline of the privatisation process. "Parliament has 30 days to discuss the general outline and approve it," Vanek said on November 15.
The setback is the latest in a series of delays stalling the privatisation. Cabinet had originally planned to find an investor for ST by the end of September, with entry to take place by the end of the year. But the government's inability to agree on the size of the stake to be sold, as well as an October 26 court injunction blocking the Economy Ministry from handling its 100% stake in ST, have meant that the original deadline has been scrapped.
Vanek told The Slovak Spectator that given the latest delay, an investor may now not enter ST until April. He said that five major European telecom players had already informed the Telecom Ministry of their interest in buying ST - Deutsche Telecom, Dutch Telecom, France Telecom, Tele Danmark and Telenor (see list, page BF III). "We have held preliminary discussions with these firms," Vanek said. "But we are not sure yet who will actually bid."
The drawn-out process drew criticism from one potential investor, who warned that the longer the government took to launch the sale, the less money it would get for its stake.
"If there are too many more delays, we'll have to look to grow elsewhere," said Are Mathisen, country manager of the Norwegian Telecom firm Telenor.
"Whoever the investor will be, they must turn ST into a serious international player in a maximum of two years," Mathisen explained. "ST must become internationally competitive before its monopoly runs out [on January 1, 2003]. If the government starts the privatisation process now, there will be enough time to do this. But if there are more delays, time may run out."
'General Outline'
Before the privatisation can occur, parliament must approve the 'general outline' of the sale, a document which details key points of the process. Although he declined to give details of the outline, J. Russell McGranahan of the law firm White & Case said the most important aspect of the plan was the size of the stake to be sold. White & Case is part of a consortium led by Deutsche Bank which was selected to advise on the ST sale and which helped draft the outline.
Under former Telecom Minister Gabriel Palacka, the ministry had originally planned to sell a 34% share in ST, but then raised the figure to 49%. When Palacka resigned on August 8, Macejko upped the stake to 51%, a move approved by the government in October.
McGranahan said that he hoped the privatisation package would be passed by parliament without any further delays, but admitted he would not be surprised if new problems arose.
"Slovakia is now a democracy and the government has to come to a consensus - we can't blame them for doing that," McGranahan said. "I don't see any more barriers, but there could be more objections by different high-level government bodies. We hope there won't be any more delays but it wouldn't surprise me."
Decreasing Value
The sale of ST promises to be the most lucrative privatisation deal in Slovak history, although estimates of how much the state stands to gain differ widely. The Telecom Ministry's Vanek said that he couldn't predict how much the sale would yield, but explained that "the Telecom Minister decided to sell a 51% stake in ST, and the market value of these shares is 22 billion Slovak crowns [$530 million]."
An equity analyst, speaking on condition of anonymity, said that financial markets were predicting that the state would make $400 million from the ST sale.
Finance Ministry spokesman Peter Švec said that 10 billion crowns from the total proceeds would be stored in the so-called "memorandum chapter" of the 2000 state budget, a fund recently created by the cabinet to hold privatisation revenues. Švec explained that the reserve fund had been created at the suggestion of the International Monetary Fund, and that the money would eventually be used to pay off the state's debts.
Telenor's Mathisen said that he had also heard the 22 billion crown sum mentioned by ministry officials, but added that no investor could be sure of ST's value until they performed due diligence on the firm. Furthermore, he said, ST's market value was steadily decreasing as delays continued, making any estimates of revenues from the sale unreliable.
"ST could say [the sale will yield] any total right now, because nobody actually knows what the value is," Mathisen said.
Important privatisation
Martin Barto, the chief of the strategy division at the SLSP state bank, said that the ST privatisation was a benchmark sale in the eyes of foreign investors. In light of recent scandals involving Slovak privatisations, he said, the ST deal would be closely watched by future investors to see whether the Dzurinda government was capable of running a transparent tender.
"Investors will be closely watching this privatisation," Barto said. "It should be the first one done in a standard way, and they are watching to see if Slovakia has realised its past mistakes and can now correct them. If the privatisation has problems it could negatively affect future FDI."
Mathisen, meanwhile, said that although Slovakia is a small country, its strategic location made the ST deal an important investment project. "We have a lot of interest in countries like the Ukraine and Russia," Mathisen said. "So, geographically, you could say that Slovakia is the missing link between the east and west."
