State cheers sale of telephone company

The Baltic Times, TALLINN
Dec 03, 1998
By Kairi Kurm

Many say the Estonian government made a mistake when it offered stakes in the monopoly telecommunication company Eesti Telekom to Sweden’s Telia and Finland’s Telekom, but government officials are cheering.

The government decided to increase Eesti Telekom’s share capital by offering shares to Scandinavian investors. Eesti Telekom is a majority shareholder in its two subsidiaries, Eesti Telefon and Eesti Mobiiltelefon, where Telia and Sonera control the remaining 49 percent of shares. The Scandinavian companies each own 24.5 percent of shares in each subsidiary.

According to the government’s new plan Telia and Sonera will exchange their stakes in Eesti Telefon and Eesti Mobiiltelefon for 23.25 percent stakes in Telekom. Both subsidiaries will be controlled by Eesti Telekom after the restructuring.

Estonian Transport and Communications Minister Raivo Vare in his interview to Aripaev called the deal a success because these investors will increase confidence in the company and will push the share price up when it’s quoted on the stock exchange next year.

The government gave Telia and Sonera an opportunity to increase their mutual share in Telekom from 46.50 percent to 49 percent in an initial public offering. The state will sell 23.72 percent of its shares in Telecom on the stock exchange next year.

The state can still control the company through “a golden share,” which would be issued specially in order to protect the interests of the state and give it a right of veto when important decisions are made.

Two and a half months after the announcement of the initial public offering, the shares would be quoted on the stock exchange.

No matter how much politicians rejoice, many believe the state could have gotten a better price for these shares.

Toivo Jurgenson, head of the political party Pro Patria Union, believes that it would be better if both subsidiaries were sold to different owners in order to create competition.

A representative from competing mobile company Radiolinja Eesti said state shares in Telekom are being sold cheaply to Scandinavian companies. Several specialists also said the state could have received more money if there were competition for those shares.

“Their privatization scheme differed from what we had suggested to them some years ago. It would have been more useful to sell the shares in the holding company first instead of selling the stake in the subsidiaries,” said Vaino Sarnet, head manager at the Estonian Privatization Agency. “The state would not get maximum value now while it is dependent on [investors’] decisions.”

In the course of the deal Telia and Sonera had to give up a 2.5 percent stake in Telekom, which the government uses as the only positive argument to prove the sucess of the deal.

The government also approved Eesti Telefon’s business plan for the period between 1999 and 2008. According to this plan the company has to invest more than 700 million kroons ($51.9 million) annually over the next ten years.
Source: http://www.baltictimes.com/news/articles/3793/

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