Slovenia only receives one bid for Telekom Slovenije

By bne IntelliNews April 14, 2015

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Slovenia has received only one binding bid in the tender for the sale of 72.75% of Telekom Slovenije - a disappointing result for Ljubljana since the company is the most valuable company on the government's privatisation list and was expected to attract interest from Deutsche Telekom and two international investment funds.

Slovenian Sovereign Holding (SDH), which manages state capital investments and is in charge of the telecom's sale, said in a brief statement that only one offer was submitted by the April 13 deadline, but did not provide the name of the bidder.

Local media previously reported that binding bids had been tendered by Deutsche Telekom, UK-based private equity firm Cinven and US-based investment fund Providence, after a total of eight companies reportedly participated in the initial tender stage.

Cinven officially declared its interest in the privatisation of the Slovenian telecom in January, hinting that annual investments in the company could amount to €100mn. In March, the investor presented its business and operations to Telekom Slovenije employees, saying it was ready to support the company's business and enable its growth.

Daily Delo quoted Igor Stemberger of local brokerage house Ilirika as saying on April 13 that the modest interest in the company is linked with the fact that investors do not consider its operations very successful, while outstanding lawsuits against the company total some €400mn.

News agency STA quoted another local analyst, Saso Stanovnik from brokerage Alta Invest, as saying that it was a huge disappointment that the sale had attracted only one bid. Under the circumstances, the sellers will not be in a position to negotiate on raising the price.

The 72.75% stake on offer is jointly controlled by SDH, state pension fund manager Kapitalska Druzba, reinsurer Pozavarovalnica Sava and insurer Triglav.

Telekom Slovenije is the largest on the list of 15 state-controlled firms that Ljubljana plans to sell under a major privatisation plan adopted in June 2013. The government is reportedly eyeing €1.6bn from the sale of the majority stake in Telekom Slovenije.

Given the size of the company, its planned sale has been the subject of controversy within Slovenia. In February, In February, around 3,000 people took to the streets of Ljubljana in a demonstration sparked by the plans to sell off Telekom Slovenije. Demonstrators chanted “privatisation is theft” and warned that the programme risked pushing up unemployment.

More recently, a spat over the privatisation cost Defence Minister Janko Veber his position. Prime Minister Miro Cerar asked the parliament to dismiss Veber after accusing him of overstepping his powers when ordering the intelligence services to prepare a report on the consequences of Telekom Slovenije's pending privatisation. A government crisis was narrowly avoided when Veber’s Social Democrats decided to remain within the ruling coalition.

A decision to sell Telekom Slovenije at a lower than expected price is unlikely to be politically acceptable, and could result in more demonstrations and conflict within the ruling coalition. However, if the sale flops altogether, that could be a setback for the government’s plans to expand the privatisation programme in future.

Telekom Slovenije's consolidated net profit plunged to just €1.6mn last year from €51mn in 2013 as the company had to set aside additional provisions worth €43.6mn. In late 2014, it sold its stake in Gibtelecom Limited to the government of Gibraltar for €47.7mn.

In 2015, Telekom Slovenije expects a consolidated net profit of €66mn. It has earmarked €107mn for investments this year. The group comprises the Telekom Slovenije operator and several other companies in Slovenia, plus Kosovo's Ipko Telecommunications, Blicnet and Siol in Bosnia and Herzegovina, One and Digi Plus Multimedia in Macedonia, and several smaller firms in Montenegro and Croatia.

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