KISHINEV, Moldova-Biggest Russian carrier Mobile TeleSystems (MTS) failed to win a place in the wireless market of Moldova as its major shareholder, Sistema Financial Corporation, and the Moldovan government disagreed over the price for the 51-percent stake of the national Moldtelecom operator.
As a result, the Moldovan government cancelled the tender, which was the third unsuccessful attempt to privatize Moldtelecom, the landline monopolist. The first attempt was in 1997, but failed as investors offered too small a price. The government then decided to auction Moldtelecom in 2000, however, changed its mind because of a deteriorating situation in the telecom market.
In 2002, the government announced an international tender and promised to issue to Moldtelecom a GSM license to make it more attractive. The Moscow City Telephone Network (MGTS), in which Sistema holds a major stake, applied and remained the only bidder after preliminary selections. There was no secret that the deal, if successful, would give the GSM license to MTS.
The Moldovan government initially estimated the 51-percent stake at US$120 million, but then halved the price to US$60 million. Sistema, however, proposed US$20 million for the stake and another US$10 million of investments. No deal was reached, and the government reportedly plans a new tender. However, Alexander Goncharuk, president of Sistema-Telecom, which manages Sistema’s telecommunication assets, said his company would no longer bid for Moldtelecom.
“The Moldovan authorities requested an inadequate price for the asset. There are many assets that are much more efficient for acquisition at the same price,” he said, but did not elaborate.
Goncharuk added the deal was also inhibited by recent personnel reshuffling in the privatization commission, which could not but alarm Sistema. “As a prudent investor, I could not continue negotiations, as not everything was clear. Let them first clear up the situation themselves,” Goncharuk said.
The Vedomosti newspaper commented that MTS was not upset over the failure of the deal, as the risky Moldovan market could raise the risk of investments into MTS itself. “Increased risk can negatively tell on the cost of the company,” it said.
Still Moldovan failure cannot but affect MTS’ plans of expansion to the Commonwealth of Independent States (CIS), which unites 12 former Soviet republics. The carrier was reportedly also eyeing a stake in Armenian ArmenTel operator, however, the auction was cancelled this month. So far MTS is present in Belarus and Ukraine.
