Elektrim set to win dispute with Deutsche Telekom
Power and telecom conglomerate Elektrim has nothing to fear from a Deutsche Telekom challenge before international arbiters, analysts said, following a Polish court's ruling that reaffirmed the legality of a transfer of Polska Telefonia Cyfrowa (PTC) shares.
The German side has argued that Elektrim improperly ignored Deutsche Telekom's first-refusal rights in accumulating a 51% stake in the mobile phone operator, then seeking to move the majority stake to a joint venture with French Vivendi.
Deutsche Telekom holds a 49% stake in PTC, which operates the Era GSM mobile service. "From the point of view of Polish law, (Elektrim) did everything legally," said Zbigniew Lapinski, a regional telecom analyst at Deutsche Bank Research. "They have a partner (Vivendi), they have money. The case is over."
A regional court in Warsaw ruled on March 3 that Elektrim had not violated the commercial code when it increased its ownership in PTC from 36% to 51% last October, after purchasing shares from BRE Bank and insurer Warta. Elektrim intended to merge its PTC stake into the joint venture with Vivendi, Elektrim Telekomunikacja.
"Deutsche Telekom now realizes they have no chance to win with Elektrim in this matter of the transfer of 51% of PTC," said Rafal Gebicki, head of research at Raiffeisen Capital & Investment Polska.
The court ruling cleared the way for Elektrim to complete its agreement with French utility and telecom group Vivendi, and transfer the majority stake to Elektrim Telekomunikacja. The decision will also bode well for Era GSM, Gebicki said, "because now Deutsche Telekom and Elektrim can concentrate on increasing the value of Era GSM and not waste time in the courts."
Deutsche Telekom filed the lawsuit arguing that Elektrim's acquisition of additional shares was unlawful toward Deutsche Telekom and other PTC shareholders that enjoyed the rights to first refusal.
After losing the first battle, Deutsche Telekom filed a lawsuit against Elektrim in an international arbitration court in Vienna. Elektrim fired back by counter-suing in the same international arbitration court, claiming that Deutsche Telekom had violated an Era shareholder agreement by taking legal action against Elektrim.
"It's rather funny diplomatically that Deutsche Telekom thinks it can win in international court," said Gebicki, pointing out that the Vienna court would be unlikely to override decisions by two Polish courts. Poland is not a member of the European Union, and therefore is not subject to EU mandates of commercial law, he noted.
Elektrim is confident that the Vienna court's decision will be favorable since "the accordance of our actions (were) confirmed by the two decisions of the court in Warsaw," Ewa Bojar, spokeswoman for Elektrim, said in a prepared statement.
The company has not received any information concerning a trial date for the Vienna case, she added. Bojar said Elektrim had not ruled out the possibility of an out-of-court settlement.
But Hans Ehnert, a spokesman for Deutsche Telekom, said he could not envisage a settlement with Elektrim, since the Polish company filed its countermotion in the same arbitration court.
The legal proceedings do not appear to have affected Elektrim's business plans. Bojar pointed out that even with an unfavorable decision in the arbitration court, Vivendi would pay the first $100 million in losses with the rest of the costs divided between the two companies. Deutsche Telekom is seeking $135 million, so Elektrim would have to pony up $17.5 million if the case is lost, she said.
