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EDITORIAL

The ST saga: All's well if it ends well

The government approval of the sale of a 51% stake in Slovenské telekomunikácie has brought to an end the long-running saga of what Slovakia was going to do with one of its biggest privatisation assets.
A sale that should have taken place years ago was brought to a close as one of the world's leading telecoms players, Deutsche Telekom, shelled out 40 billion Slovak crowns ($898 million) for the majority share. Hip, hip, hurrah, the first truly big Slovak privatisation at a price higher than the government had expected, a benchmark for those to come, and a pat on the back for Mikuláš Dzurinda's government.
But what lessons have been learned from the process, what went right, what went wrong, and what can the government do as it heads towards the sale of a 49% stake in its cash-cow, gas company SPP, and majority stakes in its three biggest banks, Slovenská sporiteľňa, Všeobecná úverová banka and Investičná a rozvojová banka?

The government approval of the sale of a 51% stake in Slovenské telekomunikácie has brought to an end the long-running saga of what Slovakia was going to do with one of its biggest privatisation assets.

A sale that should have taken place years ago was brought to a close as one of the world's leading telecoms players, Deutsche Telekom, shelled out 40 billion Slovak crowns ($898 million) for the majority share. Hip, hip, hurrah, the first truly big Slovak privatisation at a price higher than the government had expected, a benchmark for those to come, and a pat on the back for Mikuláš Dzurinda's government.

But what lessons have been learned from the process, what went right, what went wrong, and what can the government do as it heads towards the sale of a 49% stake in its cash-cow, gas company SPP, and majority stakes in its three biggest banks, Slovenská sporiteľňa, Všeobecná úverová banka and Investičná a rozvojová banka?

The goverment can take heart that in the space of two drop-outs from the final round, its team of legal and financial advisors managed to keep Deutsche in the running until the very last minute. The sale went ahead. It can also take heart from the fact that it has the use of 40 billion crowns to do as it wishes - to plough into plugging budget deficits, financial restructuring in the corporate and banking sectors, and paying off old debts. It has also earned the presence on its markets of one of the world's most respected and high-profile organisations, a signal for the rest of the world and investments to come that the very biggest players are interested in Slovakia.

International loans are more easily extended to a country with a Deutsche Telekom or two working on the inside rather than knocking on the door outside waiting patiently to be let in. International ratings agencies take a second look at upgrades to investment level when a global giant plants its feet in a country.

The government is far from oblivious to these benefits, but it has to do more than it did in the ST sale to make sure it can reap the same again in future privatisations.

The government can wash its hands of blame over why the stake wasn't sold four years ago when a higher price would most likely have been commanded - after all, it wasn't in power. It can also wash its hands of the fact that the Dutch firm KPN pulled out at the very last minute because it couldn't get a 75% stake in ST. The government had always made it clear that 51% was what was on the table, no more and no less. The previous drop-out of Telekom Austria was also out of the government's hands, the Austrian firm feeling it had too much of its own restructuring to carry out without taking on a new venture in Slovakia.

What the government cannot wash its hands of, however, is the mess that was made of passing a new Telecoms Law, without which the sale could not have gone through, and the consequent delay of the ST privatisation that saw the cabinet miss its target date for the sale by nearly nine months. It must also acknowledge with shame the lack of coordination between the government, the ministries and the bidders. Firms were sometimes only made aware of vital information through second-hand sources, stumbling across press reports revealing what was going on within the company and some of its dealings, most notably the developments with ST and Poštová banka - a dangerous farce the government allowed to run too long and which caused the resignation of ST's general director, Emil Hubinák, as the race for the stake entered its final round.

Hubinák walked out in disgust at what he saw as the waste of precious funds when ST was forced to take part in a capital raise in the bank. The furore was only partially abated when the government announced that ST's shares would go back to the Telecoms Ministry. A replacement for Hubinák had still not been appointed as The Slovak Spectator went to print.

Both Telekom Austria and KPN denied that the Poštová affair had anything to do with their pull-outs, but the sometimes laughable lines of communication in the tender must have played on both bidders' minds.

But for all the slips along the way, the government got its company in the end, and probably the one it would have wanted right from the start.

Hope remains for the government with crucial privatisation projects only a few months down the road. If it chooses to learn the lessons of its near-failures with ST, it can get what it needs from privatisation: money, international standing and a significant boost to an investment grade rating. If it chooses not to do so it will run the risk of falling flat on its face at one of Slovakia's most crucial economic crossroads.

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