The game is on and far from over

"This is the last moment for Deutsche Telekom to buy

it at that price."

By Timothy Sifert

Despite Elektrim's most recent crack at corporate wrangling, existing corporate agreements will likely force the embattled conglomerate to sell its stake in Polska Telefonia Cyfrowa (PTC) well below the roughly €1.5 billion price tag, a source close to Elektrim told the Business Journal.

"Vivendi and Deutsche Telekom have every right to execute the agreement," the source said. "They probably will."

Last week the continuing saga over the ownership of PTC, the country's largest mobile operator, took a somewhat unexpected turn. Prior to a September 5 Elektrim Telekomunikacja (ET) supervisory board meeting, Elektrim representative Monika Hałupczak resigned from the ET board.

Hałupczak's move effectively nullified any decision taken at the meeting - which was convened to conclude the sale of PTC - because attendance fell short of the required quorum.

Cash-strapped Vivendi is seeking to dish off its stake in PTC to Deutsche Telekom, which at present owns 49 percent in PTC. ET (49 percent owned by Elektrim) and Vivendi own a 51 percent stake in PTC.

Elektrim was only able to stymie the deal this time because the board meeting was not "formally called," said the source, who is familiar with the shareholder agreement between participating parties. Had it not been an ad hoc meeting, there need not have been a single Elektrim representative present to approve the sale, in which Elektrim feels it is being shortchanged.

The source said ET would probably call a formal meeting for next month.

Elektrim spokeswoman Ewa Bojar said she could not verify whether Elektrim could halt the progress at future board meetings with similar tactics. She declined to comment further on the deal.

"We always expected that DT, as long as they got their own debt in order, would aggressively seek to bid for (PTC)," said the source.

But the source explained that Zygmunt Solorz, chairman of Elektrim's supervisory board and owner of TV station Polsat, has always had an interest in the choice asset.

"But there is something of a war that Solorz has started with the Germans, the French and the bondholders," the source said, referring to DT, Vivendi and Elektrim's eager creditors.

Also, the financial markets are taking heed of the urgency of completing the deal for DT, owing to an expected improvement in both equity and telecom markets.

"This is the last moment for Deutsche Telekom to buy it at that price," said Michał Marczak, an analyst at BRE Bank. "A bull market will increase that stake's value," he said.

He explained that stock exchanges, at least over the next couple of years, are expected to surge, an event that would certainly attach higher value to PTC. An uptick in the financial markets would boost PTC's value even if it isn't listed on a stock exchange.

"On the other hand, the growth in the mobile market will have a similar effect," he said. And financial and telecom analysts alike expect that the country's mobile markets will significantly expand in the next few years. Those prospects are evidenced by Poland's low mobile penetration (roughly 35 percent) compared to neighboring countries, and by the sheer aggressiveness with which both DT and Elektrim are pursuing the top Polish operator.

Marczak noted that it's difficult to predict how things may go since the agreement between the two sides is unclear.

Should DT pay up the expected €1 billion, Vivendi would get €750 million and Elektrim €250 million, according to the source.

He explained that Solorz's insistent approach to wresting more control of PTC from its other shareholders could be a liability for the indebted Elektrim.

In past negotiations it was said that Vivendi would receive €550-600 million and Elektrim €400-450 million; but then "Solorz decided he wanted to play hardball."

One scenario for the resolution of the deal has the contesting parties going to court. If that's the case, the decision could come down to "how powerful Solorz is," the source said.

DT spokesman Hans Ehnert declined to comment for this article, noting that the "the day is long", and that at press time the DT-Vivendi agreement had not expired. "We made the offer and we are still waiting."