Romanian Government to Float a Chunk of its 46% Stake in Romtelecom in 2009

The Romanian government confirmed on Tuesday that the float of its minority stake in Romtelecom, the Romanian incumbent, has been postponed into 2009, reports Reuters. Initially, the sale was meant to take place in 2006, but it has been repeatedly delayed—first due to a case of commercial espionage related to its previous advisory relationship with Credit Suisse, and later because of unfavourable market conditions. Károly Borbély, the minister responsible for telecommunications, was quoted on the decision as saying that "the government's intention to privatise Romtelecom does exist" but they "did not have a proper climate for such an initiative in the context of a bad financial situation worldwide". Borbély specified the timeline by adding that a new consultancy contract to advise the government on the offering will be done within one-and-a-half months.

Romtelecom is majority owned by Greece's OTE, which owns 54% of its shares—and which itself has been recently acquired by Deutsche Telekom. Moreover, OTE and Romtelecom co-own—with their slices of 70% and 30%, respectively—Cosmote Romania, the country's third-largest mobile operator after Orange and Vodafone. Having not chosen its advisor yet, the government still needs to decide on how large a stake of the company it will float—probably through Bucharest and London stock exchanges—but earlier comments by the telecoms minister indicate that it will in the first phase constitute at least 10% of the telco. (see Romania: 1 December 2006: Government of Romania Drops Credit Suisse As RomTelecom Privatisation Advisor On Corruption Charges andGermany-Greece: 15 May 2008: Greece Closes OTE Stake Sale Deal to Deutsche Telekom).

Outlook and Implications

• Moving on with Restructuring: Romtelecom has been somewhat infamous for its operational underachievement, and before the Greek owner took control, the telco was drowning in debt and had been also forced to put down its notoriously underperforming mobile unit, Cosmorom. OTE, however, has since then bailed out its subsidiary and successfully relaunched the mobile operator under its own Cosmote brand, so from a potential investor's perspective everything starts to be in a bearably good shape—with the company's restructuring set to continue, as the strategic emphasis shifts from fixed telephony towards mobile services and Romania's largely untapped broadband market (see Romania: 29 January 2008: Romtelecom's Streamlining to See 12,300 Jobs Lost). A whole different, matter, then is whether the cited market conditions—perceived as "unfavourable" by the government, even before the current credit squeeze—will improve enough for the state owner to get a fair price for its assets.

• Eyes in Internet: Romtelecom has been eyeing two licenses, which would enable it to bring fast internet access to Romania's rural and suburban areas—where, with Romania being relatively sparsely populated, there exists a large customer segment currently cut off by poor fixed-line infrastructure and challenging geography. The first tender concerns a CDMA 450 licence, and is currently at the stage where the regulator, ANRCTI, is reviewing the four filed bids, including one by Romtelecom. The second set of frequency bands—within 3.6-3.8 GHz—to be available would allow the incumbent to start offering wireless broadband through WiMAX (see Romania: 6 August 2008: Four Bids Filed for Romanian 450 MHz Licence, Romania: 13 June 2008: ANRCTI Outlines Plans for 3.6-3.8 GHz Frequencies).