The government of the Czech Republic is prepared to offer up to 25 percent of equity in the state telecommunications company SPT Telecom to foreign investors later this year, according to a senior government official.
The share would be substantially less if the winning bid came from another state-run telecommunications company, said Vladimir Sedlacek, head of the telecommunications division at the Ministry of the Economy.The Czech Republic follows in the footsteps of the Hungarian government, which announced recently that it would offer a 30 percent stake in its telecommunications company, Matav.
Mr. Sedlacek said in an interview that the bidding will open later this spring and the winner will be selected at the end of the year.
The government estimates a 25 percent stake in the telecommunications company is worth close to US$900 million. SPT Telecom employs 25,000 people, and the system has 1.84 million subscribers.
SPT Telecom has embarked on an extensive renovation program to upgrade the obsolete system and double its capacity by the year 2000. Mr. Sedlacek said the government plans to spend about $270 million in the first stage to create a new digital overlay network within the next three years.
The money for this project would come from government-guaranteed loans by the European Bank for Reconstruction and Development, the European Investment Bank and the World Bank in roughly equal amounts.
The London-based EBRD announced earlier this week that it has approved its $90 million share of the loan.
Mr. Sedlacek said the size of the initial offering in the telecommunications company depends largely on whether the bidder is a private enterprise or a state-run telephone company. "We don't want to end up being controlled by another government," he explained.
Accordingly, the share offered to a state-run company would be limited to 15 percent. The 25 percent stake to a private company would be just the initial offering and would likely be increased later, according to Mr. Sedlacek.
Western firms already participate extensively in the Czech telecommunications sector. Eurotel, a joint venture between SPT and two U.S. companies, U.S. West and Bell Atlantic, has invested more than $70 million to build the country's cellular telephone system. Germany's Siemens and Alcatel SEL have won a contract to supply digital switches, while American Telephone & Telegraph Co. will supply the network's digital links. Both contracts are worth about $145 million, according to Mr. Sedlacek.
Under the government's plan to privatize SPT Telecom, 26 percent of the company would be sold to the public in the voucher program and much of the rest would remain in the government's hands. Western companies would be offered a share in a new stock offering that would boost SPT's capital by 30 percent and dilute the government's holdings to 51 percent.
Under current law, the government must keep a controlling share in SPT at least until 1995. It then may dispose of some of its holdings.
Mr. Sedlacek said the ideal Western partner would be a telephone operating company, or a consortium that includes a phone operator.
The Hungarian government plans to issue its tender for Matav in June. The company's assets are estimated at 150 billion forints, or $1.76 billion at current exchange rates.