Telekom Serbia enters BiH market

28/12/2006

A high price offer has successfully ended the privatisation process for Telekom Srpske, one of the leading companies in BiH.

By Vlatko Vukotic for Southeast European Times in Banja Luka– 28/12/06

Telekom Serbia has offered 646m euros for a 65% share of Telekom Srpske. [File]

Telekom Serbia has won the international tender for 65% of Telekom Srpske, a leading telecommunications company in Republika Srpska (RS). The winning bid amounted to 646m euros, well ahead of the 179m euros offered by the competing bidder, Telekom Austria.

With an annual revenue of 40m euros, Telekom Srpske currently has 630,000 mobile subscribers and 350,000 fixed network subscribers. The buyer has agreed to invest at least 50m euros in company development within a year. The company headquarters will remain in Banja Luka, and all contract stipulations signed with the trade union will be respected.

Telekom Serbia is promising higher service quality for the customers in BiH, new additional services and lower prices. It projects investment recovery in the next ten years. The Serbian firm is seeking to gain a national license that would allow it to build market share in both of BiH's entities.

The high bid, which far surpasses the RS budget for 2007, has been welcomed by the entity government. The authorities have already announced plans to invest the revenue in job growth, retirement system reform, improved social services and the building of modern infrastructure in RS.

Serbian Prime Minister Vojislav Kostunica also hailed the purchase, saying it will help strengthen already strong relations. Ahmet Hadzipasic, prime minister of the Federation of BiH, congratulated the RS government on the deal.

Boris Nemsic of Telekom Austria's board of directors, however, argues that the price offered by Telekom Serbia is too high and reflects a political decision rather than market conditions. Telekom Austria has offered to enter contract negotiations with RS authorities if any problems occur with the tender winner.

"The indisputable fact is that Telekom Serbia is not the top telecom company, but if they pay the full price as agreed and fulfil all contract conditions, then we don't have any reason to worry," says economics professor Rajko Tomas of the University of Banja Luka.

Currently, drafting of the privatisation contract is under way. The RS government is requesting that the entire purchase price be paid within one month of signing.