Min looks for backup TPSA plan
The Treasury Ministry was scrambling last week to find an alternative to France Telecom's bid for a strategic stake in Telekomunikacja Polska (TPSA), the Business Journal has learned.
The search for alternatives was spurred by the fact that France Telecom is the only bidder for a TPSA stake and it is not willing to increase the price it will pay for the telecom giant. The ministry was put in a weak negotiating position after U.S.-based SBC Communications pulled out of the TPSA tender in early November.
Now, to beef up its negotiating position, the ministry has started a cautious flirtation with Telecom Italia and is also considering the possibility of offering TPSA shares on the New York Stock Exchange (NYSE), according to a number of investment bankers and lawyers who are close to the telecom company.
The ministry was keeping mum on its plans last week. "There will be no comments on the TPSA tender," said Maciej Chojnacki of the Treasury Ministry's press office. He confirmed, however, that Treasury Minister Emil Wasacz has yet to decide on whether to enter into exclusive negotiations with France Telecom. The French company placed its final offer for a 35% stake in TPSA at the beginning of December.
Wasacz had been expected to decide on the negotiations by last Wednesday, but instead has held back. In the meantime, the ministry appears to be opening the door to possible talks with Telecom Italia.
That company would not comment on any possible talks, but several telecom insiders said it had made overtures to the ministry and appeared to be getting serious about starting actual discussions.
The ministry has also kept the door open to the idea of scrapping the tender for a strategic investor altogether and floating more shares through a secondary public offering. While the Warsaw Stock Exchange (WSE) had seemed the natural place for such a float, the NYSE is being discussed as a possibility.
Analysts were cautious, though, in deciding whether this would be a feasible idea.
"Listing in New York? It would be bad news for our capital market, but definitely good news for the company," said Piotr Wozniak, a telecom analyst with CDM Pekao Securities.
That's because listing on the U.S. stock exchange would improve TPSA's image, Wozniak added. "Also, the stock price would be more stable," he said. "But on the other hand, it would reflect what's going on in the American, not the Polish, market."
If it chooses to list on the NYSE, most likely by selling American Depository Receipts (ADRs), it would follow the lead of companies such as Polska Telefonia Cyfrowa (Era GSM) and Netia that have tapped U.S. markets. TPSA would not, however, be the first Central European telecom company to go to the NYSE. Hungarian national telecom operator Matav listed ADRs on the NYSE, and Czech operator SPT is listed in London.
It remains unclear, though, if the ministry would be able to raise more money through a public offering than through a sale to a strategic investor. "It's a difficult question," Wozniak said. "And much depends on promotion."
In its final bid, France Telecom offered zl. 23 per share, or zl. 11.3 billion ($2.69 billion). The company has refused to increase this offer.
"I don't think the state treasury would be able to raise that much from the market," said Bob Creamer, a telecom analyst with Raiffeisen Capital & Investment Polska. In his opinion, the best option would be to go both routes: a sale to a strategic investor and a public offering.
"In any case, TPSA needs some kind of decision regarding its ownership structure," Creamer said. "And fast."
Pawel Zach, an analyst with Citibank (Poland), shared a similar view.
"Cancellation of the present deal would mean a six-month delay," he said. "The best solution would be to sell TPSA to France Telecom and to go ahead with the public offer, be it New York or London."
From the very beginning the share price was the main reason behind disagreements between the state treasury and France Telecom. Originally, the treasury hoped to collect zl. 28-zl. 30 per share, or zl. 13.7 billion-zl. 14.7 billion ($3.26 billion-$3.5 billion), for a 35% stake in the company.
France Telecom refused to meet the ministry's price expectations mainly due to the unclear regulatory situation surrounding the Polish telecom market and questions about TPSA's ability to keep its dominant position when the market is liberalized in 2003. That was also reported to be a reason why the other bidder, SBC, pulled out of the tender.
On the other hand, from the very beginning, France Telecom was considered to be a natural investor in TPSA, mainly due to its eight-year presence on the telecom market here. France Telecom has a 34% stake in mobile telecom operator Centertel, a joint venture with TPSA.
TPSA was partially privatized last year when the state treasury sold 15% of the company through an initial public offering (IPO) on the WSE and the sale to international investors of global depository receipts (GDRs).
