Macedonian "Telekom" Sold

Everything is in the sign of gold: By January 11, 2001 the Hungarian consortium "Matav" will pay DM 780 million for 51 percent of the most profitable Macedonian enterprise and, as its strategic investor, invest at least DM 500 million over the next two years.

AIM Skopje, December 28, 2000

The end of 2000 marked the end of a three-year long period of uncertainty. The "golden goose" of the national economy has been sold. The consortium "Matav" is the new boss of the Macedonian Telekom. Apart from the Hungarian operator, which belongs to the German telecommunication giant "Deutsche Telekom", a significant part of shares belongs to the Greek company "Demko" (property of Ineramerican) and "Kosmo telko", as well as George Soros' CEEF Fund, which has behind it the US Government Agency OPIK, in charge of helping American businessmen investing in risk areas.

By January 11, 2001 "Matav" should pay 362.5 million of Euros or DM 708 million for the managerial package of 51 percent and four-year monopoly over the Macedonian "Telekom". Under the Agreement which Minister of Finance Nikola Gruevski and Elek Stroub and Herman Horst, Directors of "Matav", signed in Skoplje, this consortium has undertaken to invest in Telekom 136.6 million Euros in the first year and additional 119.1 million Euros in the second.

According to the plan the new strategic partner will invest over 630 million Euros in the modernisation of technological capacities and services over the period of seven years. This includes the installation of new 142 thousand fixed and 167 thousand cordless phone lines, 53 thousand ISDN channels, 3,500 ADSL links and 380 thousand new mobile users. Also, the plan envisages the development of a solid Internet service compatible with European standards which will enable the application of Internet in the economy by means of the latest WAP and GRSP technologies, and the transformation of MobiMak into an independent operational and financial mobile telephony system capable of successfully cooperating with independent mobile operators from other countries of the region, especially from Greece and of increasing its capital. The new bosses intend to turn these capacities, which will altogether cost around DM 1,85.5 billion, into the main telecommunication centre in the Balkans which will be "laying the golden eggs".

At the same time they are offering to Macedonian Telekom to become a part of "Deutsche Telecom Group" which operates in 65 countries of the world and promise that this business deal, which has fluttered the dovecotes, will be beneficial to all citizens of Macedonia, as well as country itself. Macedonia kept the right to the "golden share" which enables it to protect vital national interests, which means, as it was explained to the public, that neither the name nor headquarters of Telekom will be changed and that the new boss will not be able to sell shares to other interested parties as long as it has a monopoly, nor to increase service rates without control, i.e. for more than 6 percent annually above the rate of inflation.

Let us remind that the Macedonian Government brought the decision on selling Telekom in January 1998. The original plan was to do this in stages and cede the strategic foreign investor only 33 percent of shares, and later on more, depending on the "work results" and situation on the market. At that time only one company expressed its interest so that the idea of the sale was abandoned.

The privatisation process started with the World Bank, i.e. its Dutch members IFC and ING, investing DM 25 million in the form of a loan until such time when Macedonia makes the final selection of a strategic investor. The set deadline was June 2000. The agreement included a proviso that the invested money would not be repaid, but turned into shares. That will be done this time, as this time, despite some delay, the investors have not changed their mind.

The new international public tender was issued early this year. Allegedly, on the recommendation of IMF, a control package of 51 percent of shares was offered for sale. It is open secret that the decision on the percentage was independently brought by the ruling politicians. Six companies expressed their interest, out of which only three got to the last lap. Those were the Hungarian "Matav", the Greek "Ote" and the Slovenian "Telecom". The Slovenes withdrew three days before the opening of received envelopes so that the special Government Commission and privatisation consultants from London, the Macedonian Telekom hired, had to choose between the Hungarian and Greek offer. They were under the strong pressure of lobbyists, as well as businessmen and diplomatic representatives of interested countries. Rumour has it that even Greek Prime Minister Kostas Simitis personally interceded, as well as US Ambassador in Skoplje, Mike Inic, which displeased may people here. Those well versed claim that the Greeks offered DM 5 million more in cash than the Hungarians, Germans and Americans together, but were weaker in the investment part of the project which was decisive for the final choice.

Now that all is said and done, the opposition, which was the only opponent of the sale of management package of the state-owned shareholding company "Macedonian Telecommunications", is trying to prove that the amount of fee tipped the scales in the selection of partners and not how favourable the offer or development visions of the candidates were.

Naturally, the Government denies this stating that by choosing "Matav" consortium, a well-known and recognised most sophisticated telecommunication operator in Eastern Europe (owns 2.9 million fixed lines and has 1.2 million mobile subscribers and with 1.5 billion Euros of profits realised in 1999 ranks high at the Budapest and New York stock exchanges), it acted in line with the world trends in this profitable business. It underlines that in this way, it has avoided the Greek domination in the Macedonian economy and opened the doors to other foreign investors. It is convinced that this will positively reflect on country's stability and living standards of all its citizens. The Government plans to use one third of the money received from the sale of Telekom for the repayment of some old outstanding foreign debts. On the basis of an agreement with IMF, the second third will go for the increase of foreign exchange reserves and the remainder will be invested in development projects in the fields of social care, education, health, infrastructure.

The process of "golden privatisation", as the sale of Telekom is called here, constantly caused strong reactions, both economic as well as those of political nature. This is quite understandable as this concerns the "golden goose" of the national economy which, with its 504 thousand subscribers of fixed and 100 thousand users of mobile telephony and over 10 thousand regular INTERNET users, whose number is growing daily, brought over DM 120 million of net profit to the state annually. That was the reason why there was quite a large number of those who opposed the sale of Telekom and did everything they could to make the already concluded deal fall through. They say that there is plenty of time for that until the strategic partner makes the actual payment. The united opposition tried to do this from the parliament's rostrum at the extraordinary session of the Macedonian Assembly. It accused the Government that for the sake of its own interests it was disregarding the citizens' interests, who will in the end, through no fault of their own, foot the bill of this "business adventure". In view of the hitherto experience, it came to the conclusion that there was no provision in the contract concluded with "Matav" guaranteeing that the new boss would invest the promised money in development.

Or, as they said, that if he does invest, that the citizens - users of its services - will again bear the burden because, allegedly, the contract specifies that rates will be harmonised with those applied in Europe up to the level of 50 percent in international and 75 percent in local communications. According to the opposition, the price for which Telekom has been sold is lower than it should be in view of its real value, because it is one of the most developed companies in the region. Its value has been estimated at DM 2 billion. The Government was especially criticised for alleged non-transparency of the process of sale which was carried out by the party, because there were no impartial members in the commission for the selection of candidates. The opposition was embittered because the Government has no strategy nor criteria for the most profitable investment of the funds once the money "is deposited", but advocates the repayment of debts which is, to begin with, an inexcusable mistake. It warned that the moment they find out about this, countries creditors will instantly reduce the approved reliefs for the repayment of debts, which now amount to 40 percent.

The opposition VMRO-DPMNE accused the Government that it had intentionally set the assessed value of Telekom DM 300 million below its real value, in order to use the remainder for the payment of numerous lobbyists who took part in the sale of the "golden bride". In addition, it insisted on stopping the privatisation of Telekom until ownership structure of the company is specified. It demanded that all citizens who, at one time, paid some DM 1,000 for the phone line in the period between 1981 and 2000 and participated in the development of the PTT network, be indemnified as they now have the right to take part in its privatisation. It claimed that some DM 280 million were collected in this way, which is 16-17 percent of Telekom's real value. It also mentioned the funds with which the employees have helped the company's development and on account of which they are entitled to 10 percent of shares. It called upon all citizens to defend their rights in courts by bringing legal action against Telekom in private suits. According to the representative of the Legal Committee of the united Macedonian opposition, Petar Selegov, the first attempts were unsuccessful, because under the pressure of politicians the court rejected the filed charges as ungrounded. He announced that plaintiffs will appeal to the higher instance.

According to analysts litigations regarding the ownership structure of Telekom have only begun and the politics has yet to show its power. Zoran Krstevski, Vice Premier, announced that in case the court accepts the charges filed by the citizens, their share will be paid from the Government's shares. Time will show whether the sale of the Macedonian Telekom is the "gold that glitters" or not!

AIM Skopje

BRANKA NANEVSKA