Govt. renews effort to sell stake in TPSA
The Treasury Ministry is betting on a few wildcards in its bid to relaunch the strategic sale of Telekomunikacja Polska (TPSA).
Timing is key to getting the right investor and the right price, and the time could not be better concerning investor interest, analysts said. But the biggest threat to a successful sale rests with the government itself and recognizing that selling the state's crown jewels this time will take more than a publicity campaign in the international press.
Under guidelines for the sale announced last week, the state is looking to sell 25-35% of TPSA to a strategic investor and has set a deadline of Feb. 11 for initial offers. Although no official price tag has been set, sources close to the deal said the government was looking to exceed zl. 30 a share in the deal, a 5% premium to the current market value and representing a $3.5 billion price tag for the 35% stake. The state is also considering a later sale to institutional investors for an unspecified stake on the New York Stock Exchange.
The list of potential bidders so far includes Telecom Italia, Deutsche Telekom, British Telecom and Japan's DoCoMo, the subsidiary of Nippon Telegraph and Telephone (NTT), and France Telecom, the only finalist in the previous tender, sources said.
With only one finalist, cancelation of the previous tender in late December came as no surprise, analysts said. But further delays will greatly damage the sale seeking a premium as the market moves toward liberalization in 2003.
"According to our schedule, the sale should be completed by the end of the first half of this year," Henryka Bochniarz, president of Nicom Consulting, the adviser to the state treasury on the sale.
The climate for TPSA's sale has improved significantly with many global telecoms flush with "free financial capacity" due to deals they didn't complete last year, Bochniarz said.
"One can really expect that this time the list of investors will include more companies than France Telecom and SBC Communications," said Zbigniew Lapinski, analyst with Deutsche Bank.
A major change in investor appetite was demonstrated in the host of merger and acquisition (M&A) activities in the telecom market here and abroad last year.
"It looks like everybody was buying everybody," said Jan Sudol, telecom analyst with Donaldson, Lufkin & Jenrette. "And the largest telecoms want to get a foothold in every European market."
Now is the right time for multinationals to implement the M&A strategy more vigorously, he added, and no wonder that the state treasury hopes the wave of ongoing mergers and acquisitions will engulf TPSA as well.
There is also a chance that the ministry learned from the previous experience, Sudol said. "The marketing of the offer was definitely not sufficient during the first tender," he said. "And the seller didn't take any particular steps to attract buyers. Now they can improve it."
Analysts expect that France Telecom is likely to join the race once more, but this time submitting a more ambitious offer. Adding spice to the competition would be the participation of Deutsche Telekom, which now appears to be losing the battle over control of mobile phone company Polska Telefonia Cyfrowa (Era GSM) to global competitor Vivendi, the French telecom and utility conglomerate. Era is jointly owned by Deutsche Telekom and domestic conglomerate Elektrim. Elektrim is pushing to bring Era into its fold as the star wireless provider in Elektrim Telekomunikacja, of which Vivendi is the joint partner. Deutsche is trying to block the move in international courts and the case is currently being considered by an arbitration court in Vienna.
"Of course, if Deutsche wins the dispute with Elektrim, one can't expect it will leave Era," Sudol said. "But if it stays with minority ownership, who knows?"
Faced with minority ownership, Deutsche could easily find greater interest switching from Era to mobile phone operator Centertel and its parent company TPSA, added Piotr Wozniak, telecom analyst with CDM Pekao Securities.
"Deutsche could be a bidder one should take seriously," Wozniak said.
But Deutsche Telekom so far is refusing to publicly comment on a possible bid for TPSA and interest in Centertel.
"If there is such an offer, we have to check on that, but we wouldn't comment any further," said Hans Ehnart, press spokesman with Deutsche Telekom.
Considering Deutsche's entering the fray for TPSA, and the relatively strong interest expressed from other leading global telecoms is no cause for complacency in the government's second effort to sell its leading firm, industry analysts warned. Any deal is still far from being 100% sure, they said.
"Even the largest companies have limited managerial and financial resources," Sudol said. "So there is always a risk that they will focus their interest on Western European deals that are still more attractive."
Moreover, the ministry is hoping to garner more than zl. 30 a share, and has upped the ante to gain a strategic hold in TPSA. Unofficial tender guidelines set a threshold exceeding zl. 30 per share, a 30% premium to France Telecom's rejected offer of zl. 23 a share.
"We hope that this time the price offer will be better than that," said Bochniarz, pointing out that TPSA's recent price increase should be taken into account by potential investors.
"I agree that the ministry should demand a higher price, looking at the market," said Deutsche Bank's Lapinski.
On Dec. 29, 1999 TPSA's share price rose to zl. 27.10, up almost 30% from an average trading range of zl. 20-zl. 21 in November, following SBC's pullout. TPSA closed Friday zl. 28.5 a share.
