Tomáš Malatinský (source: TASR)
THE STATE already has a plan to sell its 49-percent stake in a major telecoms operator, Slovak Telekom (ST), after the government discreetly signed a memorandum with the majority owner of the company, Deutsche Telekom. Though concrete dates, the method of sale or the price tag are unknown, the country’s finance minister has already hinted that some of the money the state is to cash in for its minority stake is earmarked to finance a return to a single payer health-care system, something Prime Minister Robert Fico has claimed is a priority.
There was little publicity around the actual signing of the key document with Deutsche Telekom on February 12 until opposition deputy Daniel Lipšic pointed at what he called the completion of the privatisation of ST under “not very transparent conditions”, while calling on the government to publish the memorandum.
The Economy Ministry has denied any secrecy, with Economy Minister Tomáš Malatinský saying that the agreement between ST and the German company to proceed jointly during the sale should not be called privatisation. The state has nevertheless been tight-lipped about the details of the memorandum, arguing that for the disclosure they need the consent of the majority owner.
Malatinský believes Deutsche Telekom will give its consent.
Fico has several times referred to the possible sale of the 49-percent stake in Slovak Telekom, indicating that it is not of strategic state interest. The state indeed is obliged to negotiate the sale of shares with Deutsche Telekom, as the German company has first rights to acquire the state-owned shares, with Economy Ministry spokesman Stanislav Jurikovič saying that the majority owner “has neither accepted nor given up this right”, the SITA newswire reported.
The expected value of the shares can be as much as €800 million, but the actual price might be lower because of a fine from the European Commission for handicapping its rivals on the market, the Sme daily wrote.
Slovak Telekom, part of the multinational group of companies of the Deutsche Telekom Group, is the largest telecommunications operator in Slovakia. Deutsche Telekom holds a majority stake of 51 percent, the Economy Ministry has a 34-percent package and the remaining 15 percent is held by the national privatisation agency, the National Property Fund (FNM).
Details of a deal
The date of a definitive sale of shares cannot be determined at this point, said FNM spokeswoman Miriam Žiaková on February 14.
“We can only talk about how long the project of the sale itself will last, but all parties involved wish to complete the sale within nine months from engaging the investment bank,” Žiaková said, as quoted by SITA.
The shareholders have agreed that Slovakia will use a so-called dual track procedure, which means that it will work in parallel on two potential forms of sale: on the capital market, as well as direct sale to a third party in an international public tender, SITA reported.
“The final decision on the method of sale will be made after a market survey is carried out by the chosen investment bank,” Žiaková said, adding that the price will be determined based on what she called “a transparent dual track process, managed by a renowned global investment bank”.
Privatisation by another name?
“We call on Robert Fico to publish the memorandum,” said Lipšic, as quoted by the TASR newswire on February 13. “The prime minister has been endlessly saying that he is against privatisation and that under his government nothing will be privatised. However, it appears that besides [state-run railway freight carrier] Cargo, he also wants to complete the privatisation of Slovak Telekom under not very transparent conditions.”
Juraj Miškov, a former economy minister and now opposition deputy, suggested that the “speedy privatisation” can be ascribed to the fact that Finance Minister Peter Kažimír needs to fill the state coffers, TASR reported.
Malatinský rejected the criticism, responding that “statements by the current opposition who in times of privatisation were sitting in the government are hypocritical, if I take that today the state has a minority share without any control in this company”, TASR reported.
“I reject linking this agreement with privatisation,” he said.
The minister has also said that selling shares through the stock exchange is the most transparent method of sale, while the price for the Slovak share will be proposed by advisors and investment banks based on the situation in the market.
“Now the selection of advisors and investment banks will continue while the state can sell its share up to nine months through the so-called Initial Public Offering (IPO),” Malatinský said.
Financing health reform
The yield from the sale of the state’s 49-percent stake in the Slovak Telekom should ideally be used to reduce the state debt, Finance Minister Peter Kažimír said last October. There had however already been an assumption that this money would go toward the government’s intention to buy out the two private health insurers, Dôvera and Union, en route to installing a single-payer state run health system.
Kažimír confirmed on February 16, however, that the project of a single health insurer might gain momentum thanks to the sale of Slovak Telekom. While speaking to the public service Slovak Television and admitting that the state does not have cash to pursue the project, he suggested that money from the proceeds of the sale of Slovak Telekom could be used for this goal.
According to newswires, Lipšic did estimate the value between €800 million to €1 billion, claiming that Fico will not be able to reach that level: “I am certain that in the upcoming months we will be hearing why such a value could have not been met”.
The company
Smer backs the idea of the sale with the argument that the state has a weak influence in the Telekom: “Telekom is one of those assets that the state has, but does not manage, nor receive any dividends,” said Fico last year, as quoted by Sme.
Back in 2000, the first government of Prime Minister Mikuláš Dzurinda sold the state’s 51 percent share in Slovak Telekom for €1 billion, while it estimates that the value of the company since then has grown exponentially. Last year the operator had 2.2 million customers.
Slovak Telekom has also grown in other ways. It acquired DIGI Slovakia, operating in the country since 2006, from the Romanian RCS & RDS consortium. DIGI provides cable television and internet access services in 10 Slovak cities with the majority of its 270,000 customers using its TV and internet services.
Nevertheless, the company’s value might also be influenced by an eventual fine that the European Commission is likely to impose on it for what it called a refusal to supply unbundled access to its local loops and wholesale services to competitors. The EC launched a formal proceeding against the company after it carried out an unannounced inspection at the premises of Slovak Telekom in January 2009 while the investigation was completed last year. The likely fine is estimated at €200 million, according to Sme.
