Gap in bids for TPSA stake extreme
Final price offers submitted by two bidders interested in a 25-35% stake in Telekomunikacja Polska (TPSA) are far from comparable, the Business Journal has learned.
While France Telecom's offer is zl. 38 per share, or zl. 18.6 billion ($4.1 billion) for a 35% stake, Telecom Italia is willing to pay only zl. 29 per share, or zl. 14.2 billion ($3.1 billion) for the same holding. Bids were submitted at the end of April.
In spite of the more than obvious price differences, Treasury Minister Emil Wasacz announced last week that the ministry is considering a "parallel solution," meaning unprecedented, exclusive negotiations with both investors.
"They wouldn't be very exclusive," said Zbigniew Lapinski, a telecom analyst with Deutsche Bank. "But such an approach is quite understandable, as it might push the price up."
But according to the sources close to TPSA's sale, exclusive negotiations with the two bidders are unlikely.
"The ministry likes to play games," said a source close to the deal. "But eventually only one bidder will be chosen for exclusive negotiations."
The decision is expected by the middle of this week, while the sale is scheduled for July.
"It's been obvious that France Telecom would do everything to win the tender," said Adam Kalkusinski, a salesman with Wood & Co. brokerage. "Personally, I even didn't expect the Italians to make it to the second stage."
According to the sources, Telecom Italia, which is interested in TPSA's mobile and not its fixed-line operations, would be willing to increase the price only if certain conditions are met. These include guarantees of full control over mobile telecom operator PTK Centertel, which was awarded a GSM 1800 license in August 1997 and a GSM 900 license in July 1999. Centertel is jointly owned by TPSA, which holds 66% of shares, and France Telecom, which has 34%.
"Of course, Telecom Italia could reach an agreement with France Telecom," Lapinski said. "But in this case, the price should be very attractive."
Analysts agree that the Treasury Ministry shouldn't delay the tender's outcome any longer.
"The price France Telecom is offering is a very good one," Lapinski said. He added that any delays or attempts to cancel the tender could result in a lower price, considering the recent falling prices of all publicly listed telecom operators.
According to Kalkusinski, markets saw a discount of about 40% on all technology, media and telecommunications (TMT) equities. TPSA's share price dropped by 20-25% from its 52-week high at the beginning of March, when it traded at zl. 40 per share, to zl. 30-zl. 32 per share.
Last Friday, TPSA closed at zl. 33.4 per share, making the share price offered by France Telecom a 13.8% premium to the current market price.
"The market would react positively to information that TPSA's privatization is completed," Kalkusinski said. And information that TPSA would actually have an investor is even more important than knowing who the investor is or what price it is willing to pay.
"That's because the whole privatization process has taken too long," he said. TPSA's privatization has already been delayed not by months, but by years, Kalkusinski added.
The privatization saga started in November 1998 when the government sold 15% of TPSA's shares on the Warsaw Stock Exchange and to international investors through global depository receipts (GDRs). The government raised $924 million from that sale. An additional 15% was doled out to the phone company's former and current employees.
The current price of $4.1 billion is considerably more than France Telecom offered in the first tender last autumn. Its proposal then was zl. 23 per share, or $2.69 billion for a 35% stake, and failed to meet the treasury's expectations of zl. 30 per share, or $3.5 billion. The tender was cancelled in December after another bidder, U.S.-based SBC Communications, decided to pull out.
The strategic investor will have the option to buy another 10% of TPSA later this year and up its stake to 51% by September 2001.
