Slovakia should use the proceeds from the potential sale of its 49% stake in telecoms operator Slovak Telekom (ST) to reduce the government’s debt, according to Finance Minister Peter Kazimir, quoted by TASR news agency.

Prime Minister Robert Fico has previously said that the state wants to sell its stake in ST in order to raise money for the planned buyout of the country’s two private health insurers in order to create a single, state-run, health insurer. The government has estimated that it could raise about EUR 600mn to EUR 800mn from the sale.

If it uses the money for reduction of the public debt, that would be positive for the debt metrics. Slovakia’s government debt-to-GDP ratio rose to 54.9% as of end-March 2013 from 52.1% at the end of 2012, according to the latest available data by Eurostat. In nominal terms, the debt of the Slovak government grew by 21.6% y/y to EUR 39.35bn as of end-March. The finance ministry has forecast the public debt to peak at 57% of GDP in 2015 before starting to go down. Slovakia adopted in December 2011 a debt brake law, according to which a debt-to-GDP ratio above 50% is triggering debt brakes.

German telecoms group Deutsche Telekom, which owns 51% of ST, has expressed interest in exercising its buy option for the state’s stake. If it gives up buying the stake, the state could sell its shares in ST on the domestic stock exchange, according to economy minister Tomas Malatinsky. Negotiations and preparations for the privatisation are still ongoing.

Slovak Telekom, which employs some 4,200 people, posted a revenue of EUR 392mn for the first half of 2013, down 3.9% y/y due to price cuts reflecting regulatory demands and strong competition. Its EBITDA fell 5.3% y/y to EUR 162mn. The number of active mobile subscribers fell 2.3% y/y to 2.273 million at the end of June 2013.

Slovak Telekom competes with France Telecom’s Orange, the country’s biggest operator and with Spanish Telefonica's O2, which is the smallest operator, but the only one that has been reporting growth in revenue and subscriber numbers for more than a year now.

Slovakia sold a 51% stake in the former fixed-line monopoly to Deutsche Telekom for EUR 1bn in 2000.