Treasury Ministry flirts with Telecom Italia for TPSA stake
After being dumped by SBC Communications, the Treasury Ministry spent last week trying to woo another bidder, Telecom Italia, for the impending privatization of Telekomunikacja Polska (TPSA), the Business Journal has learned.
The treasury is trying to get out of the corner it has painted itself into, whereby it currently has just one bidder interested in TPSA France Telecom. The ministry and France Telecom have been locked in a dispute over price. France Telecom is unwilling to pay the minimum $3.4 billion the ministry wants for a 35% stake because it says the regulatory environment and the future of TPSA's monopoly are too hazy. Those concerns are what caused SBC to drop out as well, according to analysts.
To bring Telecom Italia into the bidding, however, the ministry would have to cancel the current tender and call another one, and last week analysts said that government officials were unlikely to do that. Analysts and a source close to the negotiations pointed out that Telecom Italia has expressed initial interest only.
"It's not foreplay, it's not even a flirtation," said the source. "The situation is reminiscent of a ball during which two people exchange smiles and think about approaching each other."
The only way the ministry would call another tender would be if it thought Telecom Italia could potentially beat France Telecom's offer, said Zbigniew Lapinski, telecom analyst with Deutsche Bank.
"First of all, it would be justified only in one case: if a new investor offers an exorbitant price," he said. "But I doubt anybody is going to offer more than France Telecom."
In its initial bid, France Telecom offered more than zl. 11.3 billion ($2.8 billion) for 35% of TPSA, while SBC bid zl. 8.8 billion ($2.2 billion). However, the Treasury Ministry is refusing to accept less than zl. 13.7 billion ($3.4 billion)-zl. 14.7 billion ($3.6 billion) for 35%, or even as much as $4.9 billion. That translates into a per share price of zl. 28-zl. 30, a 40% premium to TPSA's current price of around zl. 21. TPSA's shares moved little on the news that SBC pulled out, closing at zl. 20.9.
The company was partially privatized last year when the government sold 15% through an initial public offering (IPO) on the Warsaw Stock Exchange (WSE) and to international investors through global depository receipts (GDRs). After the sale to a strategic investor, the Treasury Ministry will still hold 30% of TPSA's shares.
In addition to the regulatory concerns and price, France Telecom and SBC have also been leery of the heavy restructuring TPSA will need once sold. For example, analysts have said the company needs to slash its 70,000 employees.
That much-needed restructuring had analysts last week saying that the ministry should stop playing games and hammer out an agreement with France Telecom.
"The ministry should sell to France Telecom and to end it for good," Gebicki said. "Telecoms are attractive, but let's face it TPSA is no crown jewel."
While dealing with one bidder alone is not an ideal situation, analysts said that pushing France Telecom to the side in favor of a new bidder could sink the tender entirely.
"It's obvious that France Telecom would pull out of the deal," said Rafal Gebicki, chief analyst with Raiffeisen Capital & Investment Polska. "After all, they are a serious company."
