Foreign telecoms hesitant to buy increased stakes in Polkomtel

“(TDC) doesn’t have a strategic need to buy a controlling stake in mobiles.”
By : Roseanne Gerin

   The two foreign shareholders of mobile operator Polkomtel will not likely increase their stakes in Poland’s second most popular mobile operator in the near future, although both said earlier this year that they would consider buying more shares.

   Danish operator TDC Tele Danmark and British telecom firm Vodafone stated last August and June, respectively, that they wanted to increase their shares in Polkomtel, which has three million subscribers. Each company holds a 19.61% stake.

   Despite statements about their desires to increase their stakes, as well as an announcement by TDC that it wants to gain control of Polkomtel, the two companies have not taken any action to buy shares from other stakeholders who have indicated they are ready to sell. State-controlled oil refiner PKN Orlen, which has a 19.61% stake in Polkomtel, and Polish Power Grid (PSE), with a 16.05% stake, announced earlier this year a willingness to sell their shares. Both PKN Orlen and PSE need cash for their own industry investments.

   Another major state-owned shareholder, copper and silver group KGHM Polska MiedŸ, however, said last June it wanted to increase its 19.61% stake in Polkomtel. The purchase of more shares is unlikely, however, since KGHM would have to raise new cash for the purchase, said Bob Creamer, a telecom analyst at Raiffeisen Capital & Investment Polska.

   Leszek Kamiński, Polkomtel’s spokesman, said he wasn’t aware of any of the operator’s shareholders starting the necessary legal proceedings to change their stakes.

   TDC indicated that a purchase was not in the near future, although the company previously said it would give close consideration to upping its stake in Polkomtel if the share price was attractive. “It’s a matter of price, conditions – all the stuff you do before M&A activities,” said Ole Soeberg, TDC’s director of investor relations. But he added that the firm has not held discussions with the other shareholders. “There are no considerations about this in the short term.”

   “The answer to the question is open,” said Soeberg about the possibility of TDC increasing its stake in the future. “We don’t want to commit ourselves in one area or another” because TDC is in the process of selling some of its international assets.

   Analysts indicated that Vodafone was the more likely candidate to eventually buy additional Polkomtel shares, but that the firm would also wait it out.

   “(TDC) doesn’t have a strategic need to buy a controlling stake in mobiles,” Creamer said. “Vodafone is all about mobiles, and its strategy is to sit and wait until it (can) gain majority stakes. There’s no reason to suggest it will (buy more Polkomtel shares) in the short term. They are not upset by not having control.”

   Vodafone repeated this position. “If you look at our history of acquisitions, we start buying up from an investment position,” said a Vodafone spokesman in the investor relations department. He declined to provide further comment.

   During the past several years foreign owners have been fortifying their holdings in Polish telecom companies. Last month, a France Telecom-led consortium purchased an additional 12.5% stake of national telecom operator Telekomunikacja Polska, boosting its shares to 47.5%. The French company and TPSA jointly own PTK Centertel, Poland’s third largest mobile operator. Also, French media and utilities group Vivendi won a battle with Deutsche Telekom in June to obtain control of Polish conglomerate Elektrim’s telecom assets, including Polska Telefonia Cyfrowa (PTC), the country’s largest mobile operator.

   Recent management shake-ups at Polkomtel might have deterred TDC and Vodafone from increasing their stakes, said Andrzej Kasperek, a telecoms analyst at Bank Handlowy.

   “The state treasury is not a good shareholder and doesn’t have a positive impact on the company’s management,” he said.

   In addition, KGHM’s overpriced $4 billion valuation of Polkomtel along with the downturn in telecom markets worldwide would likely prevent any deals from being made soon, Kasperek said. Bank Handlowy estimates Polkomtel’s value at $2.9 billion.

   But, Kasperek added, “KGHM and PKN must sell their stakes sooner or later. They are portfolio investors, and they don’t have the slightest idea how to run a telecom.”