Advent stunned by Bulgarian U-turn

After months of negotiations, the Bulgarian government has walked away from plans to sell a 65 per cent stake in telecommunications group BTC to Advent International.

The protracted privatisation of Bulgarian Telecommunications Company (BTC), the Bulgarian state telecom operator, to Advent International took a final decisive twist yesterday when the Bulgarian state privatisation agency voted to reject the sale.


Advent had agreed to pay E210m for a 65 per cent stake in BTC. But Petko Nikolov, chairman of the privatisation agency board, cited ‘legal inconsistencies’ in the Advent offer, as well as objections to Advent’s plans for BTC's shares to be transferred to companies registered in offshore tax havens. The government also faced objections because of Advent’s plan to reduce the 24,000 workforce by 25 per cent. Opposition parties, the media and trade unions in particular slammed the Advent bid as too low.


“The decision of the Privatisation Agency Supervisory Board to cancel the deal surprised and disappointed us as a foreign investor, who had come to make business in Bulgaria,” said Christian Mruck, an Advent spokesperson. In an interview with Bloomberg, Mruck’s colleague Joanna James said: “It's pretty difficult to see a way our offer can be revived. It's difficult to understand the basis of this decision in law.”


The government is now expected to resume talks with the consortium made up of Koc Holding and Turk Telekom, which has indicated that it is willing to match Advent’s original offer.


BTC serves 38 per cent of the country’s population of eight million. It expects to report a seven per cent rise in 2002 revenues to $551.3m and a 20 per cent increase in net profit to $150m.


A previous attempt to sell BTC during the upturn of the telecom market in 2000 to a Dutch-Greek consortium comprising Royal KPN and Hellenic Telecommunications Organisation for $610m failed when bids disappointed in terms of price.


The latest tender similarly failed to attract major European operators, and Ministers had held a heated debate over whether to ask the bidders to improve their offers, to accept one of the existing bids or to abandon the tender altogether.


It is thought the deal’s collapse could have a significant impact on Bulgaria’s efforts to secure overseas investment as it looks to secure EU membership status by 2007. Speaking last month, the US ambassador in Sofia described the BTC deal as a “serious test” for US investors. “Advent participated and won the BTC tender, which everyone believes was fair and transparent. We believe the completion of a deal with Advent is of a strategic importance. It would show that US companies could come here and make good business.”