Sale of TPSA shares remain undecided

A decision to sell state-held shares of dominant telecoms group Telekomunikacja Polska (TPSA) will not be made until France Telecom (FT) decides whether to exercise its 2002 buy option, the Treasury Minister said last week. Ailing giant France Telecom, which holds 47.5% of TPSA along with Polish partner Kulczyk Holding, has an option to buy a 2.5% plus one share stake to gain an outright majority of the firm by the end of the year. The treasury, which holds more than 20%, has also flirted with the idea of a share flotation this year or next to gain badly needed privatization revenue. TPSA is Eastern Europe's largest stock with a market value of about $4.2 billion. FT's sinking valuation and nearly €70 billion debt may leave it in no condition to spend more cash on TPSA, whose results it already consolidates.

"We don't have a strategy," said Treasury Minister Wiesław Kaczmarek when asked about the treasury's plans for reducing its TPSA stake. "Currently FT has its own problems. Their option is valid until the end of the year. Afterward we will know what we have, and then we will make up our mind." To the chagrin of investors, Kaczmarek has also signaled that Poland may want to use most of its remaining stake of TPSA as a handout for ailing state firms. TPSA said it saw no immediate threat of fallout from FT's troubles, including chairman Michel Bon's recent resignation and the firm's move to cut off financial support for troubled German mobile operator MobilCom, in which it owns a 28.5% stake. Analysts said that TPSA's valuation, which has shrunk 30% so far this year and hovers near all-time lows, already reflected worries that FT would scale back its vast investment plans or would try to divert cash flows from TPSA's mobile arm. - Reuters