Will Telecommunications Company Be Sold

All Privatization Anti-Logic Put Together

AIM Sofia, July 7, 2000

If you ask representatives of Greek-Dutch KPN/OTE consortium when the business deal on sale of Bulgarian telecommunication company (BTK) and the second GSM channel will be closed, they will answer: “By the end of the month”. However, if you put the same question to negotiators of the Bulgarian state, they would tell you: “Perhaps there will be no deal at all”.

Just a couple of months ago, the roles were exchanged. For almost two years the government of Ivan Kostov has been promising that it would sell the most attractive part of Bulgarian economy by the end of the month or by the end of the year.

If this discord between expectations and breaking of promises seems illogical, this is because the whole procedure of these negotiations is almost absurd. It is not at all clear yet which of these two extremes is more credible – whether there will be a contract to the end of July or whether there will be none at all.

The only thing that is clear is that both parties wish to close a profitable deal and that negotiations have finally come to essential issues. It seems that the period of intentional stalling of the negotiations is over since the task was taken over by technocrats in the cabinet of Ivan Kostov. Previously, the negotiators were political figures – by now former minister of industries Aleksandar Boskov and former deputy prime minister Evgeni Bakardzijev. The former was recently dismissed from the post in executive power because he was suspected of corruption, and the latter was replaced in the changes of the cabinet last December. It is suspected that he is responsible for intentional prolonging the negotiations in order to enable a big profit for the only GSM operator Mobiltel.

According to the agreement with IMF, the deadline for signing the contract was the end of 1999. However, when it became clear that the budget would hold out without the planned half a million dollars from the sale of telecom, Kostov's cabinet decided not to hurry with the deal. Nowadays it seems that it has estimated that it might even interrupt negotiations in the interest of the state.

The fact that negotiations have been going on for almost two years and that the negotiators have been replaced a couple of times is not the only absurdity. It turned out that both the buyers and the sellers had prepared a few surprises. The government agreed to pass a few legal amendments in order to meet the interests of the buyer and change articles in the draft contract.

The cabinet is preparing amendments of the law on telecommunications according to which BTK will get a guaranteed monopoly in the market until 2002. Deputies of the opposition Bulgarian Socialist Party (BSP) – 49 of them – submitted a question to the Constitutional Court how constitutional provisions on state monopoly of telecommunications should be interpreted and whether it was possible to transfer it to other persons, even if it was in privatisation deals.

The buyers also demand guaranteed monopoly in transfer of data via Internat, VSAT satellite services and mobile phone services which the government is willing to meet. The Constitutional Court is expected to decide whether these services belong in national telecommunication network.

The cabinet has introduced a new, who knows which amendment in the Law on Privatisation which gives the Greek-Dutch consortium the right to name without a public competition the person who will get the licence as the second GSM operator. The demand has also been met for the amendment according to which buyers, also without soliciting for tenders, will be able to confer management of BTK, once it is privatised, to a company connected with them. It is generally known that OTE is interested in BTK while KPN is a candidate for the second GSM operator. Besides, the consortium still is not registered in Bulgaria which is the main requirement for closing such deals. The cabinet used all possible arguments to justify the amendments of the Law and deny the thesis that they had been introduced especially for this deal. The official thesis of the economic commission of the parliament is that the principle “without public competition or soliciting for tenders” will be applied in deals which in themselves assume competition among buyers. Allegedly, amendments have been made not because of BTK, but in order to enable greater flexibility for major investors.

The principle is clear – everything for the sake of privatisation of BTK and its buyers. However, the Greek-Dutch consortium still was not satisfied, although most of its demands are even contrary to the principles of competition of the EU. And the cabinet grew tired of listening to new demands. That is why the possibility appeared that no deal would be closed despite the desperate efforts of the cabinet and recommendations of IMF. “We will either find a joint stand or we will terminate the negotiations”, minister of transportation and communications Antonij Slavinski declared.

KPN/OTE demanded that the requirement on public competition for equipment be abolished. Bulgarian authorities assume that this is done in order to ensure profitable orders for Greek company INTRACOM which does not have a good reputation in Bulgaria but with which OTE has a very lively cooperation.

It is also known that the buyers have demanded to take over control of the so-called independent telecommunication networks which enable connections among certain departments (police, army and similar). New amendments are required of the laws on telecommunications and on privatisation aimed at increasing the number o services which would be BTK's monopoly, like for example, international calls. And as a cherry on top – that part of the money amounting to 600 million Euros will be paid only after the government passes the demanded legal amendments. In other words, the cabinet is expected to guarantee that the sovereign Bulgarian parliament will meet the wishes of the consortium within two months. If not, it will get 120 million Euros less for national telecom.

It seems that even the ruling circles in Bulgaria are slowly starting to realize that there have been too many concessions and that privatisation at any cost has no sense. Therefore, it will be no wonder if so many absurdities bring about the logical end - that no deal will be closed and that everything should start from the very beginning. The cabinet was not enthusiastic about OTE participating in the public competition anyway. After all, a higher price was planned in the first place and it has never been reached in the negotiations.

Georgi Filipov

(AIM)