Two bidders up stakes in TPSA sale
A bidding war is likely to erupt for state-telecom operator Telekomunikacja Polska (TPSA) as both France Telecom and Telecom Italia, companies short-listed to take a 25-35% stake, are willing to pay top dollar, the Business Journal has learned.
Henryka Bochniarz, president of Nicom Consulting, which advises the state treasury on TPSA's sale, confirmed that both telecom firms are readying to substantially up their initial offering range of zl. 30-zl. 35 a share, or $3 billion-$4.2 billion for a 35% stake.
That amount was already significantly above the $2.69 billion France Telecom offered when the Treasury Ministry tried to sell the stake the first time last fall. The ministry abandoned that sale, however, because it found the price unsatisfactory.
Before the Treasury Ministry can get its hands on a hefty pay out, however, it will have to get around the Communications Ministry. A source said bidders will only be willing to up their offers if certain regulatory issues are settled beforehand. Bidders have been concerned about how the Communications Ministry will eventually regulate interconnection fees the money independent operators pay TPSA to connect to its network and a large source of revenue for the company as well as how long TPSA will maintain its monopoly on international calls. Bidders also are unsure how the new communications minister, Tomasz Szyszko, will approach the issues. Szyszko took over as minister two weeks ago, replacing Maciej Srebro.
"Regulatory issues make up 70% of the price, heavily influencing the price investors are ready to pay," Bochniarz said. "But they have to be solved first."
While Poland is set to fully deregulate its telecom market in 2003, it still lacks guidelines for how issues will be handled in the transition. A lack of those guidelines as well as the absence of a new telecommunications bill already helped to sink the first tender for TPSA. The lack of clarity prompted the United States' SBC Communications to back out of the tender, leaving the ministry with only France Telecom as a suitor.
"The problem is we have two contradictory forces," Bochniarz said. "The state treasury wants the highest possible price while the Communications Ministry (wants) to deregulate the market as soon as possible."
A too rapid liberalization of the market, however, will serious impact TPSA's revenue in the short term and thus make it less attractive to potential investors, she said.
In addition to the question of how long TPSA's international monopoly will last, bidders also want to know how long Poland will require domestic long-distance operators to obtain licenses. At present, only three companies hold licenses to provide domestic long-distance services, and those companies were only awarded the licenses in February.
According to analysts, while regulatory issues are not the only ones influencing investor interest in TPSA, they play an important role.
"TPSA is an attractive company and Poland is an attractive market," said Rafal Gebicki, telecom analyst with Raiffeisen Capital & Investment Polska. "But an investor needs a strategic vision, which is impossible without a telecommunications law in place."
This is something Parliament has to take care of, he said, since the draft on the law has been waiting for approval for one year.
"But the dismissal of the communications minister doesn't help either," Gebicki said.
According to a source who has worked closely with the privatization, previous Communications Minister Maciej Srebro had almost come to an agreement with France Telecom on some of the issues and was willing to provide TPSA with a three-year transition period.
"Nothing was fixed, but he (Srebro) was full of good will," the source said. "With the new minister, we don't know. He is an enigma."
According to Bochniarz, if the new minister signs off on the existing agreement, then TPSA's sale to a strategic investor could be easily closed by summer. "If not, the process will be delayed," she said.
At the same time, the Treasury Ministry has to decide what will be the next step in TPSA's privatization. The first tranche of the company, 15%, was sold publicly in 1998, and the present tender offers only 25-35%. Both France Telecom and Telecom Italia would like to increase their stake in TPSA in the future, but at present are unwilling to commit.
"That's something that needs clarification as well," Bochniarz said. "Whether the state treasury wants to do a second offering on the Warsaw Stock Exchange, on the New York Stock Exchange. Or whether it can be bought by a strategic investor."
