TPSA sale completed at last
The largest sale of state assets in post-communist Central and Eastern Europe and in the history of Polish privatization was completed last Wednesday when a France Telecom-led consortium bought a 35% stake in the country's national phone operator Telekomunikacja Polska (TPSA) for zl. 18.6 billion ($4.3 billion).
France Telecom purchased a 25% stake in TPSA through its subsidiary Cogecom, and Polish investment company Kulczyk Holding bought a 10% stake through its subsidiary Tele-Invest in the second stage of the operator's privatization. The strategic investors paid zl. 38 per share, which added $300 million more to the treasury's coffers than the government originally anticipated.
Although France Telecom is expected to announce its strategy for TPSA within the next two months, its plans for the Polish operator will not differ drastically from TPSA's own development plans, which were put in place prior to the sale, industry analysts said last week. The sale will provide the capital needed to upgrade TPSA's current network and to invest in new technologies to ensure that the operator remains the dominant player in Poland's increasingly competitive telecom market, they said.
TPSA faces increasing competition from local operators, such as Netia and Elektrim's subsidiary El-Net, in both local and domestic long-distance services. In the mobile arena, TPSA's subsidiary PTK Centertel (Idea) competes with the country's two other mobile operators, Polska Telefonia Cyfrowa (Era GSM) and Polkomtel (Plus GSM). TPSA holds a monopoly on international long-distance calls until Jan. 1, 2003, when the current liberalization of the telecom market will be completed.
TPSA's basic strategy "to improve service to position the company ahead of market liberalization" will receive a boost from a seven-year, zl. 27 billion ($6.3 billion) investment program, said Stephen Pettyfer, a telecom analyst at Merrill Lynch in London.
As part of the deal, the consortium agreed to implement a broad-based investment program to develop all key services, including fixed-line and mobile telephony and internet services. Although more details about program expenditures are expected when France Telecom announces its strategy for TPSA, analysts said that the capital would be used to pay for one of the United Mobile Telecommunications System (UMTS) licenses that the government is supposed to offer this year. The capital will also finance the development of General Packet Radio System (GPRS) services, which offer mobile subscribers rapid access to the internet and mobile commerce, and pay for broadband for speedier internet access and data transmission services. Michal Marczak, a telecom analyst at BRE Bank Securities, said part of the money would be invested in TPSA's internet subsidiary TP Internet to develop electronic-commerce services. Pettyfer added that new information technology, including a modern billing system, would be installed.
Zdzislaw Wrzesinski, director of France Telecom in Poland, was on vacation and not available for comment. Krzysztof Plisko, who works at NBS Public Relations, France Telecom's PR agency in Warsaw, said he could not provide any additional information other than what was written on the French company's official news statement. When asked about France Telecom's strategy for TPSA, he said that it would be discussed by TPSA's current management board and its partners in the near future.
The consortium paid zl. 38 per share, 39% more than the zl. 23 France Telecom offered in the first sale of TPSA shares to a private investor in December. In the initial tender for a 25-35% stake in TPSA, France Telecom acting alone offered zl. 23 per share, or zl. 11.3 billion ($2.69 billion) for a 35% stake, after the only other bidder, American telecom operator SBC Communications, withdrew. The ministry rejected France Telecom's price as too low and cancelled the tender.
The sale should be completed by the end of September with about $1 billion to $1.5 billion of the proceeds being deposited into a special hard-currency account to prevent the money from influencing foreign exchange rates. Some of the cash will be used to service the foreign debt.
Under the terms of the deal, the consortium has the option to increase its stake to 51% by purchasing an additional 10% by July 31, 2001, and by acquiring the final 6% when the government floats at least 14% of its TPSA shares in a second public offering on the Warsaw Stock Exchange (WSE) by Sept. 30, 2001. The Polish operator's initial public offering was held in November 1998 when shares were floated on the WSE and as global depository receipts (GDR) on the London Stock Exchange.
In addition, the consortium will be able to appoint a new management board after the last transaction has been completed, but must retain TPSA's current chairman, Pawel Rzepka. The consortium will be represented by five members on TPSA's new management board. Furthermore, the consortium agreed not to cut any jobs from TPSA's bloated workforce of 71,000 for 40 months.
TPSA has about 10 million fixed-line phone subscribers in Poland and controls about 96% of the Polish calling market. France Telecom has a decade-long involvement with TPSA through their jointly owned mobile unit Centertel, in which the French company has a 34% stake and TPSA holds 66%. Centertel has 1 million subscribers in Poland. In addition, TPSA provides 80% of internet access to users in Poland. France Telecom, the largest telecom operator in France, offers telephony services in 75 other countries and has more than 58 million fixed-line and mobile subscribers worldwide. The French firm has about 1.5 million internet access subscribers in its home country.
Besides the 35% stake held by the consortium, the remaining shares of TPSA are owned by the government (35%), private investors (15%) and employees (15%).
