ECONOMY

Path opens for privatization of BTC

SOFIA – London-based private equity house Advent signed a preliminary deal with Bulgaria yesterday to acquire a majority stake in telecoms operator BTC, paving the way for a long-awaited completion of the landmark privatization. Repeatedly delayed by previous administrations, the BTC sale is seen as a test for the pro-Western government’s ability to meet pledges to speed up reforms in the Balkan state, which is hoping to join the European Union in 2007. Advent, which has invested in over 500 companies since its founding in 1984, agreed to pay 210 million euros ($220 million) for a 65 percent stake in BTC, raising its initial 200-million-euro offer, the Privatization Agency said. «The BTC privatization will be a major step toward its restructuring and preparation to face competition in a liberalizing market,» the agency said. Advent pledged to increase BTC’s capital by 50 million euros and invest 700 million euros over five years to upgrade the operator, which lost its land-line monopoly on January 1. The equity fund, which is leading a consortium bidding via a Vienna-registered vehicle called Viva Ventures, also softened initial plans to slash BTC’s staff to 16,000 in three years from about 24,800 now. Instead, it would cut BTC’s staff to 18,300 in four years. The sale, which was initially planned for completion in mid-2002 but was delayed by court battles, has yet to be approved by the sell-off agency’s supervisory board. Officials expect the deal to be finalized in about a month. Advent was preferred over a rival bidding consortium led by Turkey’s Koc Holding. Golden share Both sides agreed that the government would retain a golden share in BTC after the sale to allow the state to take part in important decisions concerning the company’s development, said the spokeswoman. The sides also agreed that before the government transfers BTC shares to the buyer, Parliament should pass a new telecoms law to regulate the industry after BTC’s monopoly expired and that the state telecoms regulatory body should grant BTC a mobile license. Bulgaria has offered the country’s third digital mobile license as a sweetener to the BTC buyer without a tender. The sell-off agency has not disclosed the price of the mobile license, but government officials previously said it would cost around $28 million in fees. Bulgaria will sign a management contract with the BTC buyer for an amount equaling 2.25 percent of BTC’s revenue. In 2000, at the height of the telecoms boom, the previous government rejected a bid of $610 million for 51 percent of BTC, including a mobile license by Greece’s OTE and Dutch firm KPN. Advent’s bid, following a sharp downturn in global telecoms shares, has triggered a high-profile debate in Bulgaria as to whether the BTC sale should go ahead at all. Trade unions and the opposition urged the privatization agency to abandon the sale, arguing the price was too low, planned investment insufficient and job cuts too steep. But the government’s economic team of young, Western-educated technocrats has vowed to close the deal, which is needed to secure BTC’s growth and meet conditions under financing deals with Bulgaria’s international lenders.