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Telecom ministry propels two major projects forward

After the September, 1998 elections, the Telecom Ministry underscored that its two biggest tasks were finding a strategic foreign investor for the state-run Telecom monopoly Slovenské Telekomunikácie (ST) and awarding a third mobile phone tender for the GSM 1800 frequency.
While both projects have encountered obstacles, the Ministry said that new developments have occurred and that both are expected to be resolved without additional delay. In fact, according to Stanislav Vanek, the Telecom Ministry Regulatory Department Director, both issues are expected to be concluded before the start of the new millennium.
"The GSM tender will be decided this month," Vanek said. "And we hope to announce the strategic foreign partner for ST as early as November."


Executives inside Telecom Ministry headquarters in Bratislava say ST will be privatised by the end of the year.
photo: Courtesy Telecom Ministry

After the September, 1998 elections, the Telecom Ministry underscored that its two biggest tasks were finding a strategic foreign investor for the state-run Telecom monopoly Slovenské Telekomunikácie (ST) and awarding a third mobile phone tender for the GSM 1800 frequency.

While both projects have encountered obstacles, the Ministry said that new developments have occurred and that both are expected to be resolved without additional delay. In fact, according to Stanislav Vanek, the Telecom Ministry Regulatory Department Director, both issues are expected to be concluded before the start of the new millennium.

"The GSM tender will be decided this month," Vanek said. "And we hope to announce the strategic foreign partner for ST as early as November."

ST privatisation

The government decided in 1997 to award ST a legal monopoly of all Slovak basic voice telephone services until January 1, 2003. This January, in an attempt to raise ST's deficient technological advancement and to prepare it for the international competition that the conclusion of the monopoly is sure to bring. the Ministry announced plans to privatise ST by offering a 30% share in the company- a share that has now been upgraded to 49%.

"The state still intends to maintain majority ownership," Vanek said. "How much will eventually be sold, is still not clear, it's still open. The situation will develop and change. But, regardless of how much is sold, the main priority must be the development of ST."

The ministry's attempts to select the foreign investor has reached the "next step," Vanek continued, saying that the ministry would elect a "financial adviser", a third party who would be responsible for the sale of shares to the foreign investor. "The financial adviser will be chosen this week," he said. "The main job of the adviser will be to increase the price of Slovak Telecom."

Boris Kostík, a Telecom analyst for Slávia Capital Brokerage House in Bratislava, said that three companies were in the running for the advisory position, however he declined to name the candidates.

Ľubomir Štancel, ST's public relations director, said that ST was anxiously awaiting the foreign investor who is expected to help upgrade the firm to international technological standards. "The strategic foreign partner must provide cash and technical know-how so that we can prepare for [international] competition," he said.

No possible investors have been named yet, but Slávia Capital's Kostík said that he believed the investor would be European, thus thwarting earlier reports that some Korean firms had expressed interest, and added that, whoever it would be, the company stood to reap great monetary benefits as a result of the new market access.

"The foreign investor will probably be European because they should have regional experience," Kostík said. "The investment is a good investment because the [foreign] company will gain another market. There is a trend of globalisation [in the telecom industry] right now and ST fits into this trend, it's a very good enterprise."

ST was officially transformed into a joint-stock company on April 1, 1999, another step paving the road to privatisation. ST's financial director, Igor Chochol, placed the "equity value" of ST at 20.717 billion Slovak crowns, and added that each share had a market value of 1,000 crowns.

GSM 1800 tender

The telecom Ministry's other significant project was the sale of a third mobile phone tender on the GSM 1800 frequency. The tender had first been called on August 11, 1998, but was cancelled by the former Telecom Minister Ján Jasovský. Under the new minister, Gabriel Palacka, the tender has been given a second chance.

According to Vanek, the new tender will be offered to a foreign company that satisfies the ministry's 'criteria of evaluation'. One of the criteria was that the foreign investor attain a domestic partner who would contribute 34% of funds. However, under speculation that foreign firms were having difficulty finding a Slovak partner with sufficient financial means, that percentage was dropped to 25% in March.

Vanek would not confirm nor deny the speculation, saying, "I can't say for sure if [foreign] companies cannot find [Slovak] firms here with enough money. All I can say is that the percentage has been dropped from 34% to 25%."

Offers for the tender must be submitted by April 15, Vanek continued, with the winner be selected on April 26. If more than one applicant qualifies, the tender will be decided in an auction. If there is only one applicant, a license fee of $10 million would be charged.

Slávia Capital's Kostík, meanwhile, was not so bullish on the prospects of a third mobile phone operator in Slovakia, saying that the investment would be a high-cost, low-guarantee venture. "The current 900 GSM frequency is not yet saturated," he said. "A new system [for the 1800 frequency] still has to built and they will have to sign a temporary agreement with the current networks [operated by EuroTel and Globtel]".

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