Fate of Poland's biggest mobile phone company's hangs on negotiations

Negotiations between Vivendi Universal and an investment consortium for part of the French media giant's stake in a subsidiary of troubled Polish concern Elektrim are likely to take up to three-and-a-half months while the prospective buyers complete due diligence, an official whose company is part of the consortium said. Katarzyna Górecka, the Warsaw-based spokeswoman for Dutch retail and investment group Eastbridge, said her company and an investment consortium led by Citigroup Investments were continuing talks with Vivendi to purchase 49% of its 51% stake in Elektrim's telecom, Elektrim Telekomunikacja (ET). ET controls Polska Telefonia Cyfrowa (PTC), the country's largest mobile operator. France-based Vivendi announced on March 15 that it had signed a preliminary memorandum of understanding with the consortium and said that it expected to finalize a deal within two months. Vivendi owns 51% of ET, but the memorandum covers only 49%. The French company holds the remaining shares for a put option, a contract granting the right to sell a number of shares at a specified price, which would enable it to completely withdraw from ET "in due course." Alain Delrieu, a Vivendi spokesman, confirmed that the negotiations were ongoing. The debt-laden French company is in the process of selling off its non-strategic assets, which include ET. Citigroup's London headquarters declined to comment.

'Bad signal' Włodzimierz Giller, a telecoms analyst at Erste Securities in Warsaw, said that the lack of information from the Vivendi-Citigroup talks after two months was a "bad signal" and suggested that Eastbridge was having trouble raising funds for the purchase. Górecka called the analyst's suggestion "groundless." "We are very well prepared for both deals," she said. Concurrently, Poland's BRE Bank along with Eastbridge is holding exclusive talks with Elektrim to purchase the conglomerate's 49% stake in ET, its 49% of Fiat dealer Carcom, which controls 3% of PTC, and its one additional share of PTC. The agreement will expire on July 15. Elektrim secured defaulted bonds with a 49% stake of ET. Elektrim, which defaulted last December, said last month that it had reached a preliminary agreement with the holders of €440 million of the bonds to redeem €200 million by June 15 with further repayment subject to Elektrim's funding based on the disposal of certain of its assets. The company owes a total €480 million to its bondholders. Elektrim told Reuters last month that an arbitration court in Vienna postponed a decision in its case with Deutsche Telekom, which controls 45% of PTC. Telekom argues that Elektrim gained illegal control of the mobile operator in 1999. A favorable decision for Telekom in the arbitration case could scuttle Elektrim's plans to sell its shares of ET.