Telekom Slovenije and US Apollo to make joint bid for Telekom Srbija

By bne IntelliNews November 13, 2015

Telekom Slovenije is believed to be planning a joint bid with US investment fund Apollo for the acquisition of the Serbian government’s 58.11% stake in Telekom Srbija, Slovenian Press Agency (STA) reported on November 12, citing an unofficial but well-placed source.

The merger of Slovenia's and Serbia's telecoms incumbents would create the largest telecoms provider in the region. In future, this could be an attractive takeover target for industry giants such as Deutsche Telekom.

STA says that according to its source a binding bid for a majority stake in Telekom Srbija would be formally submitted by Apollo, with Telekom Slovenije as a partner.

Telekom Slovenije has unofficially already been given the go-ahead for the move by the supervisory board of Slovenian Sovereign Holding (SSH), which manages the majority state stake in the company, the agency reports.

According to business daily Finance, the acquisition of a majority stake in Telekom Srbija is part of a plan that would eventually see Telekom Slovenije privatised with the help of Apollo, the US-based investment fund that in June signed a deal to acquire a majority in Slovenia’s second largest bank NKBM.

Telekom Slovenije's privatisation failed on August 4, when UK private equity fund Cinven, the only bidder, withdraw from negotiations for the purchase of a 72.75% stake in the telco, highlighting the uncertain business environment in which the company operates as the main reason for the withdrawal.

Finance underscores that Telekom Slovenije is not in a position to acquire its Serbian counterpart alone so it needs a tie-up with Apollo.

Telekom Slovenije told STA it would not comment on activities related to the acquisition or sale of stakes in individual companies. The company repeated that it had submitted a non-binding bid for a majority stake in Telekom Srbija in early August and was invited to take part in the second round of the privatisation process.

Serbia's Minister of Trade, Tourism and Telecommunications Rasim Ljajic announced on August 12 that Telekom Srbija's privatisation consultant, the international financial advisory and asset management company Lazard Freres, briefed the government’s commission that eight bidders had completed the conditions for the telco’s privatisation as well as that  Telekom Slovenije was one of them.

Among the eight bidders is thought to be Mobile TeleSystems (MTS), a Russian telecommunication company. According to earlier media reports, MTS’s CEO and chairman of the management board, Andrei Dubovskov, confirmed the company’s interest in Telekom Srbija, and said that the acquisition of the Serbian telco might be interesting for MTS.

Serbia’s daily Novosti reported on October 22 that American investment fund Apollo had offered €1.2bn for a 58.11% stake in Telekom Srbija, which it plans to buy, manage, and then sell to Deutsche Telekom. A Russian telco, presumably MTS, is also believed to have offered over €1bn.

STA reports that apart from Telekom Slovenije, Apollo and MTS, other prospective buyers still in the bidding process for the Serbian telco are buyout funds Advent, Mid Europa Partners and Novator Partners.

The planned privatisation of Telekom Srbija was announced on July 3, when the Agency for Privatisation invited companies with at least €2bn worth of assets or with revenues of over €500mn to make non-binding offers by August 2.

The Serbian government argues that privatisation of the telco is needed for the company’s progress as well as for the state’s economic development. However, trade unions, citizens and opposition parties oppose the privatisation.

Resistance to sales of state property is also present in Slovenia, where many people welcomed the crash of the Telekom Slovenije privatisation.

Telekom Srbija is the largest Serbian telco, providing fixed-line, mobile, internet services and cable television channels in Serbia, Bosnia and Herzegovina and Montenegro.

Telekom Slovenije Group consists of Telekom Slovenije and several other companies in Slovenia, plus Kosovo's Ipko Telecommunications, Blicnet and Siol in Bosnia, One, Digi Plus Multimedia and Debitel telekomunikacije in Macedonia, and several smaller firms in Montenegro and Croatia.

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