TPSA sale starts strong with four bids
A second go at Telekomunikacja Polska's (TPSA) privatization to a strategic investor is progressing much smoother than the first time around, with four bidders last week submitting offers for the 25-35% stake on offer.
The Treasury Ministry may also get closer to the price it wants, an issue that sunk the first attempt at bringing a strategic investor into TPSA. Of the four companies that placed offers Spain's Telefonica, France Telecom, Telecom Italia and an unidentified Scandinavian telecom operator the first three have said they are willing to pay zl. 30-zl. 35 a share for the stake, or $2.6 billion-$3 billion for 25% and $3 billion-$4.2 billion for a 35% stake.
Of all the bidders though, only France Telecom indicated it was willing to buy the entire 35% stake and to increase its holding in the future, sources close to the negotiations said last week. France Telecom and the ministry abandoned discussions in December during the first attempt to sell the TPSA stake. The French telecom firm was unwilling to pay the zl. 30 per share the ministry sought for the tender.
While France Telecom and Telecom Italia were expected to be the only serious contenders, analysts had speculated whether other interested concerns, including Deutsche Telekom, British Telecom and Japan's DoCoMo, would also submit offers.
The Treasury Ministry has not yet released any official information on the bids placed by Telefonica or the Scandinavian concern.
George Storozynski, a financial adviser at ING Barings and the adviser to the Treasury Ministry on the TPSA tender, confirmed that there were four bidders, but indicated that certain ones requested their identities not be disclosed. He also said that the bidders had to include a price they were willing to pay for the stake as part of their bids. He said that the actual price the ministry receives once the investor is chosen could likely be more than the offered prices that the bidders entered for the stake.
The bid placed by Telefonica caught analysts off guard since the firm has never been considered a possible bidder. Furthermore, Telefonica does not provide any telecom services in Europe outside Spain and Portugal. The company is, however, very active in Latin America.
One analyst said that although he was surprised by Telefonica's interest in TPSA, it was not unreasonable. "If you still believe the story that Poland will be part of the European Union (EU) in the next few years, it's not so surprising," said Zbigniew Lapinski, a telecom analyst at Deutsche Bank Research in Warsaw.
He added that the Spanish company's interest in a place as far-flung and unfamiliar as Poland reflected the globalization of the telecom industry. He said that the company may also be encouraged by the prospect that Poland may someday be an EU sibling.
"If they calculate their return of investment and they realize it's higher than in Latin America, then why not?" Lapinski said.
Analysts would not speculate on the name of the Scandinavian firm, but Lapinski said he believed only the French, Italian and Spanish companies would be named on the ministry's shortlist, which will be issued on March 6.
"If we have three bidders that are quite comparable in terms of investment and what they can bring in terms of their European experiences (then) the privatization will be successful this time," Lapinski said.
Following the completion of the bidding last week, TPSA announced that it wanted to buy France Telecom's 34% stake in Centertel, the mobile phone venture owned jointly by TPSA and the French telecom company. The buyout would increase the Polish national telecom's ownership in the mobile operator from 66% to 100%. In a second announcement, TPSA said it intended to ask its shareholders to approve a $1 billion bond issue.
Analysts indicated that the company's announcements were intended to prevent a potential dispute between TPSA and France Telecom should the French concern not become its strategic partner.
"The basic logic is that if France Telecom does not become the strategic investor, then there's no reason to have (the company) as a partner in Centertel," said Jan Sudol, a telecom analyst at Donaldson, Lufkin & Jenrette in London.
Rafal Gebicki, head of research at Raiffeisen Capital & Investment Polska, said TPSA's willingness to gain full control of Centertel could help the company avoid a possible tussle with France Telecom over ownership of Centertel if the French company does not become TPSA's strategic investor. Gebicki said that TPSA's taking full control of Centertel, one of only three mobile phone companies present in Poland's fast-growing market, would make the company even more attractive to a strategic investor. Full control of Centertel would be "some jewel in the crown for a strategic partner," Gebicki said.
Gebicki compared the possible conflict between TPSA and France Telecom over Centertel to the current legal battle between Deutsche Telekom and Polish telecom company Elektrim over control of mobile phone company Polska Telefonia Cyfrowa (Era GSM), a joint venture owned by both Deutsche Telekom and Elektrim.
The German telecom concern is fighting to not lose control of Era GSM to Vivendi, the French telecom conglomerate. Elektrim is seeking to gain control of Era GSM to combine with its own mobile service, Elektrim Telekomunikacja, of which Vivendi is the joint partner. Deutsche Telekom has filed a lawsuit against Elektrim in international courts, and the case is currently being reviewed by an arbitration court in Vienna.
