BTC sell-off finally expected to get green light

18 Aug 2003

The protracted sale of a majority stake in state-owned telecoms operator Bulgarian Telecommunications Company (BTC) is expected to be given clearance by the State Privatisation Agency this week, bringing and end to almost seven years of failed attempts to find a buyer for the company. Under a deal agreed at the start of the year, Viva Ventures, a subsidiary of US private equity firm Advent International will pay USD280 million for a 65% stake in BTC. Viva has agreed to invest up to USD700 million over the next three years in modernising BTC’s dilapidated telecoms infrastructure.

Following abortive attempts in November 1996 and 1999, the government’s attempts to privatise BTC began again in 2002 when three groups – a consortium of Turk Telecom and Bulgarian industrial company Koc Holding, UK-based Charlemagne Capital, and Viva Ventures – all submitted bids. On 28 October 2002 the privatisation agency announced that a bid of USD208 million bid from Vienna-based Viva Ventures had been accepted ahead of a EUR235 million offer from Koc Holding. The sale did not end there, however, as political opposition over the price and condemnation from the unions over proposed job cuts threatened to derail the deal. The matter was not helped by Viva Ventures’ announcement that it would only stump up a third of the money for the purchase, with the remainder coming from an unnamed investment source. In December 2002 the dispute intensified as questions arose over the legality of the Viva Ventures bid, bringing the sale to an abrupt halt. The chief prosecutor’s office asked the courts to declare the sale invalid on the grounds that Advent’s acquisition vehicle Viva had not been properly registered and that the sell-off did not meet stringent requirements for transparency and economic validity. Nevertheless, on 8 January 2003 Bulgaria’s Supreme Court approved a higher bid of USD280 million from Advent, but only after the buyer had promised to lower its proposed staff cuts by 2,000, and increased its investment coffers from USD400 million over five years to USD700 million over three.