Interest in TPSA overrated
Recent speculation of a new wave of investor interest in Telekomunikacja Polska's (TPSA) 25-35% strategic offer have been greatly exaggerated, analysts said last week.
Despite names such as Telecom Italia as a potential TPSA suitor, France Telecom remains the only serious bidder for the telecom monopolist, analysts said. However, since completion of the deal is not expected before February 2000, France Telecom will have two months to carry out its second due diligence and to hold final negotiations with the state treasury after submitting its final offer at the beginning of December.
"I think this is just a game the Treasury Ministry is playing," said Pawel Zach, an analyst with Citibank (Poland). "Nothing has changed during the last month, neither in TPSA nor in the telecom market, so if somebody wasn't interested in TPSA two months ago, why now?"
The treasury's actions could be aimed at public and investor opinion, he added. During the first half of the year, TPSA's share price rose to a mid-summer high in the zl. 28-zl. 30 range, following the government's stated price target of $3 billion-$5 billion for the sale of its prized telecom company to a strategic investor. But shares hit turbulence at that time as news surfaced that the sale would likely not go as smoothly as expected. Since its summer high, TPSA lost more than one-third of its market capitalization, almost twice the downturn in the overall market, before TPSA recovered some losses in recent weeks.
The first news to destroy the calm was when the host of expected bidders never showed up for the sale. In late August, two bidders, SBC Communications and France Telecom, indicated they would only barely meet the entrance requirements, with France Telecom offering zl. 11.3 billion ($2.8 billion) and SBC Communications offering slightly less at zl. 8.8 billion ($2.2 billion). That caused the Treasury Ministry to lower its expectations to zl. 13.7 billion-zl. 14.7 billion ($3.4 billion-$3.6 billion). The threshold equated to roughly zl. 28-zl. 30 a share and the stock price started downward hitting a bottom in mid-October at about zl. 19. In early November, SBC's pull out renewed in selling pressure, which was stemmed in the last two weeks on rumors of new investors. TPSA was trading in the zl. 24-zl. 25 range last week, about 20% down from recent highs.
France Telecom's final offer has to be submitted by the end of the first week of December. The firm is unwilling to pay the ministry's price tag because of an uncertain legal environment and revenue position, especially with respect to long-distance licenses and fees. TPSA was partially privatized last year with a 15% stake sold through an initial public offering (IPO) on the Warsaw Stock Exchange (WSE) and global depository receipts. After the strategic sale, the state will hold 30% of TPSA.
"In my opinion it's France Telecom that will be the investor," said Piotr Wozniak, a telecom analyst with CDM Pekao Securities. "They are determined to buy it, and they can afford it." France Telecom already has a 34% stake in mobile phone company Centertel, a joint venture with TPSA.
