Slovenian government rekindles Telekom Slovenije sale

One of the ten countries which joined the EU in 2004, Slovenia has since lagged behind its peers in privatising state enterprises. This has been particularly true in the telecom sector, where revenue has fallen steadily since the high of 2008. Nevertheless, investment in the sector has risen year-on-year, mostly by operators developing fibre networks and upgrading mobile networks.

A key obstruction to further growth in the sector has been the lack of effective regulation and the political will to enforce it. Telekom Slovenije has strongly resisted competitors, as also the regulator, through the courts, and the majority state ownership of the company has long been viewed as an obstacle to effective regulation.

This is set to change. In the latest of a long line of failed privatisation schemes, the government has again announced plans to sell its remaining 52.5% stake in the operator. It had originally been envisaged that the first stage of privatisation would take place in 2000. This was set back to late 2001 then delayed indefinitely due to unfavourable economic conditions. Renewed efforts in mid-2005 resulted in only a 10% stake being privatised, while another attempt in 2007/8 would have seen the state retain 25%, though the bids proved to be too low and nothing came of it.

Nevertheless, Telekom Slovenije did remain one of the principal government holdings to be privatised, and the process being rekindled now (alongside state interests in a dozen or so other concerns) is perhaps evidence more of economic pressure than a willingness to reduce state control.

Telekom Slovenije used to be a handy source of revenue for the government, but this has not been so true in recent years, with company revenue having fallen steadily since 2009. In response to the financial turmoil of recent years the company has undertaken a range of measures to reduce costs, including the restructuring of operations in Macedonia and Kosovo (the merger with Mobitel, bought outright at the end of 2010, being a key development), the sell-off of non-strategic investments, the restructuring of business processes, the sale of real estate, and changes in sales and marketing. The Group’s business plan to 2016 also focuses on making the transition from being a provider of infrastructure-related services to a provider of IT and multimedia services. These processes will be better undertaken following privatisation, wherein the company can expect to utilise additional skills and investment.

For the government, the sale is part of a bid to reduce debt and avoid the bailout which has dogged other countries in the region: as recent examples have shown, the terms of these bailouts can be harsh. The government nevertheless has submitted to an EC reform package, and as this may provide a clean sweep to remove residual excesses which drain its coffers, so too may privatisation of the incumbent provide it with new vigour in an intensely competitive market.

Henry Lancaster,
Senior Analyst

For more information see the report Slovenia – Key Statistics, Telecom Market and Regulatory Overviews

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