BTC (Bulgarian Telecom) – Privatization, NATO, Icelandic billionaire
BTC – the battle goes on
Sofia Echo, Oct 31 2002
Last Wednesday, the Privatisation Agency chose Vienna-registered Viva Ventures Holding to buy 65 per cent of the assets of the Bulgarian Telecommunication Company. The other bidder – a Turkish consortium between Koc Holding and Turk Telecom, was ranked second. Is this the end of a struggle to privatise the most attractive company in Bulgaria? IVAN VATAHOV searches for the answer.
THE Privatisation Agency (PA) had nothing else to do but to justify its decision with the apparently obvious advantages of Viva Ventures.
Proceeding from the criteria in assessing the offers – price, investment and jobs (carrying 80, 5 and 15 points respectively), Viva Ventures received 97.79 points and the Turkish consortium 94 points.
In its conclusive bids for 65 per cent of BTC the Turkish consortium offered 185 million euro, against the 200 million euro offered by Viva Ventures Holding. In their offers both bidders pledged to raise the capital of BTC by 50 million euro and to invest 400 million euro in the course of five years.
The Turkish consortium’s social programme provided for laying off 4470 of BTC’s 25 000 employees three years after the privatisation of BTC while that of Viva Ventures envisaged the layoff of 9000 employees over the same period.
Currently, the digitalisation of BTC network is below 20 per cent and in its membership negotiations with the EU Bulgaria has undertaken to raise the level of digitalisation to at least 75 per cent by December 2008. This would require the investment of about 400 million euro, which inevitably reflects on the price offered for BTC, PA executive director Apostol Apostolov said. He added that this price also reflected the risk undertaken by the investor regarding the present and future legislative framework and regulation of the sector.
But what was hidden behind these technical details of the deal?
Surprisingly, the first answer came not from any opposition figure but from a member of the Government that is selling the telecom.
Transport and Communications Minister Plamen Petrov called the price a “catastrophe”. He called for new negotiations that could make the bidders increase the offered price.
The call was made in the context of the Government having relieved itself of responsibility for BTC privatisation.
Less than a week before the announcement of the PA, the ministers left the Agency to make the decision alone.
Bulgarian-language media claimed that the question was not even discussed in a Government meeting, although this had been requested by Economy Minister Nikolai Vassilev, who felt himself responsible for the deal.
What were the comments of the ministers after the announcement of the preferred buyer? Finance Minister Milen Velchev said that, given the existing circumstances, there was no alternative to the sale of BTC for the time being.
Meanwhile, the right-wing opposition and a trade union pressed for a suspension of the deal.
Velchev told reporters last Thursday that any delay in the privatisation of the company, no matter how dissatisfactory the bid, would push the price further down and result in a possible failure of the deal and bankruptcy of BTC.
This was probably the most surprising declaration made by a top official, given that BTC was ever-profitable even in the hardest times for Bulgaria.
Petrov said that, if he must, he would ask the PA for an official proposal for a review of the bids. In his words, only after a contract was signed would he be in a position to comment on it.
“For the time being I can only say that I am not happy with the price and I will hold on to my opinion,” said Petrov.
In his words, the situation should not be complicated any further as the PA will be holding serious talks with Viva Ventures.
And while the ministers were pretending they couldn’t see what was happening, the opposition was not asleep. In fact, for the first time they found a very serious reason to attack the Government of the National Movement Simeon II.
The United Democratic Forces (UtDF) said that BTC’s privatisation should be postponed until after Bulgaria is invited to join NATO.
Nikola Nikolov, MP from the UtDF told a news conference that the price that has been offered for BTC is too low. Viva Ventures is a buyer without prior experience in this sphere and it is not a strategic investor, said Nikolov.
UtDF even insisted that the privatisation procedure for the telecom be terminated and a new procedure launched after the invitation for NATO. The opposition is dissatisfied with the low price offered for the telecom, which is equal to the company’s two-year profit. Concluding the BTC deal would be an act of treason because there are connected persons between the exclusive buyers of BTC and Bulgartabac, UtDF’s Blagoi Dimitrov said unveiling another mystery. Later, he explained that the sale to Viva Ventures was inspired by circles close to the incumbents’ economic team, obviously pointing to the usual London connection of Velchev and Vassilev.
The Government did not take political responsibility for the sale of BTC and left the decision to be taken by the Privatisation Agency (PA). Meanwhile the Confederation of Independent Trade Unions in Bulgaria (CITUB) sent an open letter to President Georgi Purvanov, National Assembly Speaker Ognyan Gerdjikov, Prime Minister Simeon Saxe Coburg-Gotha and PA CEO Apostol Apostolov demanding postponement of the BTC deal.
CITUB said the terms offered by Viva Ventures were unacceptable and that making redundant 9000 workers in three years, as suggested by Viva Ventures, would be an unbearable social price.
If the deal takes an unwanted course, BTC’s staffers are ready to stage large-scale protests, reads the letter.
Velchev commented that taken the current circumstances no other decision on BTC’s privatisation was possible. Any delay of the deal, no matter how unsatisfied the Cabinet might be with the price, would mean a lower price, a possible failure of the privatisation and bankruptcy of BTC.
The deal for BTC should be cancelled, since it’s not profitable to the state, Bulgarian Socialist Party’s Coalition for Bulgaria demanded. The socialists demanded that the Parliament adopted a special resolution on the telecom’s sale. This was stated in a declaration read by BSP leader Sergei Stanishev.
Privatisation Agency’s preferred buyer – Viva Ventures is a post-box, the socialists also stated. The investments in BTC exceed 500 million euro within the previous six years, while only in 2002 the investments exceed 130 million euro, Stanishev said. Bulgaria would take a meagre 200 million euro from the deal.
The BSP leader went even more to extremes. Last Friday in Parliament he said that the Government has approved the PA report on the sale of BTC. The Cabinet gave its support for Viva Ventures on October 22, a day before the PA officially announced the preferred buyer of the national telecom.
Cabinet spokesman Dimitar Tsonev said the Cabinet’s decision was probably either operative or taken at a closed-door meeting and was therefore not made public. In a declaration on Friday Stanishev accused the Government of having sanctioned the sale of BTC for the scandalously low price of 200 million euro.
The BSP believe that the privatisation procedure should be terminated and that Parliament should approve mandatory parameters of the deal, Stanishev said.
It is not clear what the political fights over BTC will bring in the near future. All sides have strong arguments. The Government wants to get rid of BTC as soon as possible because of reasons of serious importance like the blessing of the international financial institutions. The opposition and the trade unions also are right when they complain against such obvious characteristics of the deal like the low price, the future layoffs and others.
And the man who served most of the surprises on BTC’s privatisation recently, Petrov unleashed another bombshell on Sunday.
In Monday’s newspapers he was quoted as saying that it was possible that no deal would be struck with Viva Ventures if the Privatisation Agency failed to agree on better parameters of the deal than those initially announced. The decision was entirely up to the PA, Petrov said.
The PA might ask the winner to sweeten its bid, NMSII economic expert Vladimir Karolev said in support of Petrov’s demand for better parameters of the Viva Ventures offer. Still, there are no guarantees that bidders in a possible future tender for the telecom will offer a better price, Karolev said. Advent, the owner of Viva Ventures manages assets exceeding $7.2 billion but holds no majority stakes in other telecoms, Karolev added.
Now the next move is to be expected. No matter what the incumbents in the face of the Government or the PA decide they will not be solving the puzzle but rather deepening the crisis. The recent trend shows that the executive branch in Bulgaria is doing some hasty moves that are directed to the closest and, according to them, most important thing for Bulgaria – to be invited to join NATO. The problem is that after that there will be no excuse for the incumbents to hide behind it.
No-confidence votes, strikes – these are not the things this country should see again. And some moderate and successful politicians, like Sofia Mayor Stefan Sofianski, have forecast such developments. But, as usual, all is in the hands of the Government.