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State may be under-valuing Globtel stake

The Slovak government's expected proceeds from the sale of a stake in Globtel GSM may be far below its actual value, telecom analysts say.
Economy Minister Ľudovít Černák said in mid-April that the government expected to get at least 3.6 billion Slovak crowns ($85.2 million) from the sale of a 36% stake in the country's largest mobile network operator. On April 20, the ministry announced that the French bank Credit Lyonnais had been chosen to arrange the sale.
But analysts said the government's evaluation was too modest. "The estimate of Globtel's value using our Pan-European Macro Cellular Valuation Tool is some $1.3 billion," said Jonathan Lee, a European telecom analyst at Kommerzbank. "The level quoted by the government looks low, but they may have more information on Globtel's debt situation than we do," he added.

The Slovak government's expected proceeds from the sale of a stake in Globtel GSM may be far below its actual value, telecom analysts say.

Economy Minister Ľudovít Černák said in mid-April that the government expected to get at least 3.6 billion Slovak crowns ($85.2 million) from the sale of a 36% stake in the country's largest mobile network operator. On April 20, the ministry announced that the French bank Credit Lyonnais had been chosen to arrange the sale.

But analysts said the government's evaluation was too modest. "The estimate of Globtel's value using our Pan-European Macro Cellular Valuation Tool is some $1.3 billion," said Jonathan Lee, a European telecom analyst at Kommerzbank. "The level quoted by the government looks low, but they may have more information on Globtel's debt situation than we do," he added.

Istvan Mate-Toth at Credit Suisse added that "for a company with around 380,000 subscribers, this (price) looks rather undemanding." Globtel says it currently has over 380,000 subscribers. Globtel's only mobile competitor, Eurotel, has some 280,000 customers on its GSM digital and NMT analog network. Globtel has not yet released its 1998 financial results.

"Globtel looks very attractive, given the number of subscribers and the number of players in the market," Mate-Toth said.

Analysts said Globtel was a very attractive company, given the potential of mobile telephony in eastern Europe, but conceded that now may not be the right time for the sale, as the government is currently trying to interest investors in two other telecom properties.

In addition to the Globtel sale, the government is looking for a strategic partner for the national monopoly operator Slovenské Telekomunikácie (ST), with the deal to be concluded by the end of the year. Telecommunications Minister Gabriel Palacka said on April 20 that the government would consider selling a 34 to 49% stake in ST to a foreign partner, and that the cabinet would decide on the issue at its April 21 session. Palacka said he hoped that the sale would generate "hundreds of millions of dollars" for the state.

In addition, in the second week of April, a government tender for a licence in the GSM 1800 MHz mobile band failed, as no bids were received. Palacka blamed the failure on Slovakia's poor economic situation and the saturation of the mobile phone market, and said that another tender could be called within two weeks.

"It seems like too many Slovak telecom assets are coming up for sale at the same time," said one local analyst who asked not to be named.

Kommerzbank's Lee said major telecom companies may not be interested in Globtel, since they may have to manage it jointly with the current owners. Globtel shareholders are five Slovak utilities whose 36% stake is up for sale, France Telecom with 35% and a Slovak holding company, Slovtel, with 29%.

The current owners have pre-purchase rights on the utilities' stake.

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