Deal to Eliminate Bulgarian Telecoms Monopoly

The monopoly Bulgarian Telecommunications Company (BTC) sold 51 percent of its shares last week to the only bidder -- the Greek-Netherlands consortium OTE & KPN -- for US$502 million.

The buyer will probably obtain additional shares for $150 million, as part of its commitment to invest in the company. According to the conditions of the deal, the consortium will gain 100 percent ownership of a second license for GSM operations, and of the sole Bulgarian analog mobile operator Mobikom. Currently, Mobiltel owns the sole GSM license.

The remaining 49 percent of BTC is owned by Cable and Wireless PLC, but it is expected that OTE & KPN will appropriate that stake by the end of August. The whole deal is expected to be finalized by the end of September.

The purchase of BTC is viewed as the most significant development in the history of Bulgarian privatization, and as a success for the government. The buyer gave a better than the expected price, partly due to the interest shown by American telecommunications company GTE. The payment is in cash, the government is not obliged to invest anything in the company, and most importantly, the BTC monopoly will not be extended beyond 2002. The initial offer from OTE & KPN -- for $415 million -- was rejected because the candidate wanted to extend the period of monopoly to 2005.

According to Bulgarian analysts, delay in the liberalization of the telecom market in the country would have led to changes in the conditions of the deal, and other candidates would have appeared. The liberalization of the market is also an important condition for membership in the European Union, and furthermore, the end of the monopoly means competition which will lead to lower prices and better quality of the services.

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