Slovak Telekom announces intention to float

By bne IntelliNews April 8, 2015

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Slovak Telekom confirmed on April 8 the government’s plan to float its 49% stake in the company on the Bratislava and London stock exchanges. Slovakia hopes to earn around €1bn from the sale, although analysts suggest that could prove optimistic.

The Slovak government first announced the IPO on April 1. That accompanied approval of a plan to transfer the economy ministry’s 34% stake in the telecom operator to the country’s privatisation agency  - the National Property Fund (FNM) - which holds 15% currently.

The stake will be offered in the form of shares on the Bratislava Stock Exchange and Global Depositary Receipts (GDRs) on the London Stock Exchange, Slovak Telekom said in a statement. The offering will include a public offer to investors in Slovakia and the Czech Republic and sales to institutional investors in other jurisdictions.

“The IPO will mark an important next step in our development and bring greater visibility to the value we intend to create,” Slovak Telekom CEO Miroslav Majoros said.

Retail investors in Slovakia that submit early orders will be offered a 5% discount on the as-yet-undisclosed offer price, as well as priority in allocation on ordered shares with a total value of up to €10,000. The submission deadline for early orders will be announced during the subscription period.

Citigroup and JP Morgan are acting as joint global co-ordinators and joint bookrunners. Erste Group and Wood & Co are acting as joint lead managers of the IPO.

Swapping phones for power

The government has been trying to offload the minority stake in the national telecom operator for some time. However, it has struggled to find a strategic investor. In the meantime, it has signalled that it wants to accelerate the sale, suggesting it wants to use the funds raised to buy a majority holding in power producer Slovenske Elektrarne.

The country had previously said it had not ruled out a direct sale to a strategic investor, but it has had little success in whipping up interest. Majority shareholder Deutsche Telekom has shown no enthusiasm to utilise its pre-emptive rights to buy the stake, while Bratislava has not received “any official offer for talks for the time being", despite a series of unofficial talks, Economy Minister Pavol Pavlis said in February. 

"We cannot prevent Deutsche Telekom from making an offer, but today the government approved a sale through the stock exchange. If Deutsche Telekom comes with an offer by the time of placement, the government would consider it," the ministry spokeswoman told Reuters on April 1. 

However, despite the push from Bratislava, the German telecom sounds unlikely to get involved. "Our strategy regarding our European participations has always been to look at opportunities from a perspective of whether it makes economic sense. We will do the same with Slovak Telekom," a Deutsche Telekom spokesman said at the same time. 

The Slovak Telekom statement on April 8 said only that "Deutsche Telekom AG is not offering any shares in the offering and has stated its intention to retain its 51% shareholding in Slovak Telekom".

Bratislava had earlier said it was likely to use the proceeds to cover its financing needs for 2015. However, Pavlis has also suggested Bratislava could direct the funds to acquire part of Enel’s 66% stake in Slovenske Elektrarne. Prime Minister Robert Fico gave that plan his backing in February.

In September, the economy minister said he would like the Slovak government, which owns a 34% stake in SE, to raise its holding to 51%. Bratislava has been piling the pressure on the Italian utility since it put SE up for grabs in the summer. That has led suitors such as Czech utility CEZ to downplay their interest in the power producer via the media.  

Busy line

The Slovak operator leads a bevy of potential telecom sales around Central and Eastern Europe, though others appear to have more sparkle for strategic investors.

Romanian Communications Minister Sorin Grindeanu said on April 7 that Bucharest would prefer to organise an IPO of Telekom Romania than to open talks with the company’s majority owner Deutsche Telekom on the sale of the government’s 46% stake. In contrast to Slovak Telekom however, the German company said in March that it is ready to buy the stake, if the price is right. Romanian officials suggested in 2013 the stake is worth up to €600mn.

Local media claim Deutsche Telekom and several US and European firms are in the race for the privatisation of Telekom Slovenije. The government in Ljubljana is reportedly eyeing €1.6bn from the sale of its 73% stake.

Belgrade is revving up to make a decision on the privatisation model for Telekom Srbija. Local media speculates that Telekom Austria, Deutsche Telekom and Orange are interested. A bid from a US investment fund, in cooperation with the European Bank for Reconstruction and Development (EBRD), is also said to be possible.

Serbia last tried to sell its most profitable firm in 2011, estimating its value at €2.2bn. Telekom Austria was the sole bidder for the 51% stake on the table, but its offer of €900mn plus €500mn in future investment was turned down, It is not yet clear if Belgrade plans to put its complete stake of 70% up for grabs this time around.

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