Telekom Srbija expansion

BELGRADE – Serbian fixed-line telecom monopoly Telekom Srbija hopes to expand westward in 2005, enhancing its value and market reach before the government offers its 80 percent stake to a strategic partner. Chairman of the Board Milan Bozic told Reuters the company was seeking control of the telecoms company in Republika Srpska, the Serb half of neighboring Bosnia. «We plan to bid for Telekom Srpske when they launch a tender later this year. Their value is some $200 million, but with their market, you get a value of some $500 million,» he said. The company has further plans to secure control of Telekom Crne Gore, the sole landline operator in Serbia’s sister republic of Montenegro. But Telekom Srbija ranks only third in the bidding after Matav and Telekom Slovenije. «With Telekom Crne Gore and Telekom Srpske, we would have created a serious regional company and a market the value of which would exceed $4.0 billion,» Bozic said. «We would have offered more had the government, controlling the majority stake, allowed it. But even then, Montenegro would have turned down our offer for political reasons,» said Bozic. Serbia and Montenegro were estranged in the late 1990s, during the rule of Slobodan Milosevic. The European Union forced them to stay together in a loose union at least until 2006. Telekom Srbija’s expansion plans are benefiting from an improvement in its performance, Bozic said. With profit of $180 million in 2004 and annual revenues of about $800 million, the company paid around $78 million in dividends to its two shareholders – the state-run post office and OTE Telecom – for the first time since 1997 when it was set up. He said strong cash flow would allow the company to invest 400 million euros ($523.3 million) in 2005 to improve infrastructure and further digitize its landline network. Investments in 2004 totaled 250 million euros. Profitability grew along with the expansion of Telekom Srbija’s mobile network, which currently has about 2.4 million active subscribers, compared to an estimated 1.4 million subscribers at competing GSM network Mobtel, Bozic said. Mobtel, the first Serbian GSM operator was set up during the Milosevic era. It faces serious problems after the government went to an arbitration court in Zurich to challenge the holdings of telecoms tycoon Bogoljub Karic. Formally, Karic holds 51 percent of Mobtel. The government says he owns 41.24 percent and the state 58.76 percent. Until the arbitration court makes a final ruling, the government cannot offer its Mobtel stake for sale. Bozic said the company would like to maintain both its landline and GSM businesses under a single roof, in line with a trend in Europe. «I cannot imagine any investor bidding separately for our landline business when tariffs are so low,» he said. With both operators quite well established, Bozic said efforts to bring in a third GSM operator would be futile.