Telekom Austria AG (TKA) placed the sole bid for Serbia’s 51 percent stake in national phone company Telekom Srbija AD, risking a rejection as the offer fell short of government demands.
The Austrian phone company, which runs mobile networks in seven east European nations, offered as much as 950 million euros ($1.34 billion) in cash and 450 million euros in committed investments over the next three years, it said in a statement from Vienna announcing the conditional offer.
The bid is less than the 1.4 billion euros in cash Serbia said it needs to bolster the economy, trim the budget gap and steer the Balkan country closer to the European Union. Telekom Austria acknowledged the bid “does not comply” with Serbia’s “unconditional minimum price.” The government, under pressure by protesting employees to cancel the sale, has said failure would force it to sell more debt to meet budget needs.
“Being the only offer, it seems to be a less-than-ideal scenario for Serbia,” said Carlos Winzer, a telecommunications analyst at Moody’s Investors Service in Madrid.
If the sale is approved, Telekom Austria will gain access to almost all of Serbia’s landline network and about 60 percent of its mobile-phone market. It’s already the third-biggest mobile-phone operator in Serbia, with its Vip Mobile, launched in 2007, with a market share of 14 percent, or 1.4 million customers, according to the telecommunication company’s website.
Telekom Austria rose 1.3 percent to 10.18 euros at the 5:30 p.m. close of trading in Vienna. It erased gains of as much as 3.2 percent after the bid was announced.
It decided last year to combine its fixed-and mobile-phone units in Austria to reduce costs and also bought two cable operators in Bulgaria in September and is said to be the leading bidder to buy B.net Hrvatska d.o.o. in Croatia, two people with knowledge of the sales process said last month.
The offer “compares favorably to a share buyback with respect to cash flow generation per share,” Telekom Austria said in the statement. The offer is “conditional to merger control clearance in Serbia resulting in a market consolidation.”
The deal would be less favorable for Serbia, which has been drafting plans for a Eurobond sale later this year should it fall through. Serbia has relied on a 3 billion-euro bailout loan from the International Monetary Fund since mid-2009 to offset external liquidity pressures amid capital flight triggered by the global financial turmoil that hurt the country in late 2008.
“At first glance, I think it’s negative news” for the nation’s currency, the dinar, said Nordea chief currency strategist Elisabeth Andreew. The dinar was priced at 103.026 to the euro at 5:20 p.m. in Belgrade, down from 102.952 at 12:30 p.m.
“The government will think for a few days but probably reject this and wait and try to look for other solutions. They’ll probably have to look at selling Eurobonds,” she said.
Serbian Deputy Finance Minister Vuk Djokovic said at a press conference today in Belgrade the government’s working group will take five days to analyze the offer and announce its decision on March 28.
The other six companies that registered for the sale were Deutsche Telekom AG (DTE), France Telecom SA (FTE), America Movil SAB, Orascom Telecom Holding SAE (ORTE) through Weather Investments SpA, VimpelCom Ltd. (VIP) and Turkcell Iletisim Hizmetleri AS.
Telekom Srbija, 20 percent owned by Greece’s Hellenic Telecommunications Organizations AS, has almost 4 million fixed- line users and 7.7 million mobile-phone clients.
It owns M:Tel in Montenegro and Telekom Srpske in the Serb half of Bosnia-Herzegovina, where it controls 40 percent and 26 percent of the respective mobile-phone markets.
At least 2,000 employees marched through downtown Belgrade two days ago demanding that the company, which had $165.3 million in net earnings in 2009 and runs operations in three countries, remain majority owned by the state.