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Now a joint stock company, Slovak Telecom for sale

After three years of delay, state-owned Slovak Telecom is now a joint stock company and the search is on for an investor - likely a foreign firm - to privatise the company within the next six months.
Realising plans that had been delayed for almost three years, the Ministry of Transport, Post and Telecommunications was finally able to transform Slovak Telecommunications from a state enterprise to a joint stock company, effective as of January 1, 1999.
"What is happening now is the first step towards privatisation," said Peter Druga, the ministry's telecommunications policy department director. "We had planned on the transformation of Slovak Telecom in May '96 and December '98, but it was not accepted by the government."


Námestie Slobody - Headquarters of both Slovak Telecom and the Ministry of Transport, Post and Telecommunications.
photo: Courtesy of the Ministry

After three years of delay, state-owned Slovak Telecom is now a joint stock company and the search is on for an investor - likely a foreign firm - to privatise the company within the next six months.

Realising plans that had been delayed for almost three years, the Ministry of Transport, Post and Telecommunications was finally able to transform Slovak Telecommunications from a state enterprise to a joint stock company, effective as of January 1, 1999.

"What is happening now is the first step towards privatisation," said Peter Druga, the ministry's telecommunications policy department director. "We had planned on the transformation of Slovak Telecom in May '96 and December '98, but it was not accepted by the government."

As a result, the ministry has found that important time has been wasted. On January 1, 2003, Slovak Telecom's monopoly of the market ends and foreign competition will be allowed entrance. That gives the joint-stock company less than four years to upgrade its technology in preparation for international competition.

The new minister, Gabriel Palacka, acknowledges a sense of urgency, stating that the move was necessary to "allow the entry of foreign capital, know-how, and technologies of an experienced telecommunications operator that will be able to advance Slovak Telecom to a higher technological level."

Palacka then added that "it is impossible to keep the development of telecommunications without the participation of a private investor who will be strong and experienced enough to advance the Slovak Telecommunica-tions system to the level where it will be able to keep pace with the development of this dynamic branch."


Gabriel Palacka, the new Minister of Transport, Post and Telecommunications
photo: Courtesy of the Ministry

Seeking a foreign partner

Insiders and analysts agree that foreign investment is necessary if hopes of upgrading Slovak Telecom are to be realised. In order to achieve these goals, the ministry plans on increasing the capital of the company by creating new shares and selling them to a foreign investor.

"Current shares will not be sold," the ministry's Druga stated. "New shares are being created and they will be sold to a strategic foreign partner." He told The Slovak Spectator that the investors will be awarded a 30% stake in the company.

Martin Kabat, a market analyst with Slavia Capital brokerage house, also believes that foreign investment is a must. "The sale of shares will be to a foreign company and it must bring cash and know-how."

Several European and Asian operators have expressed a public interest in investing into the transformed Slovak Telecom, according to the head of the ministry's telecommunications section, Peter Halus.

Among those interested, he listed Deutsche Telecom, France Telecom, and the Korean companies Samsung and Daewoo.

According to Druga, the strategic foreign partner will be chosen according to four areas: "The strategic partner must bring management skills, strong finances, know-how, and they must prepare Slovak Telecom for an active role on the international market."

Druga also expressed a desire to make up for lost time by incorporating the new investors as soon as possible. "We want the strategic partner to be involved by the second quarter of this year so we can see some results by the end of this year."

Effect of Delays

In spite of the transformation plans having been stalled for three years, it is not believed that the lost time will have a great negative effect. "During the three years, Slovak Telecom did make some investments," Kabat observed. "They still have three years and Slovakia is a small country. It depends on the investor. If they get a good strategic foreign partner, the transformation should not be a problem."

"Of course, it could have been quicker," Kabat said. "They lost cash and know-how." He then went on to say that, "cash will not be a problem. If they do encounter any problems, it could be in educating employees in new systems."

Druga, meanwhile, acknowledged the tardiness of the transformation by simply stating, "We are behind schedule."

However, he also added that once a foreign investor is found, improvements will follow quickly.

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