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ATO Wants Rules Attached to Slovak Telecom's Takeover of EuroTel

SITA | 04.10.2004

The Association of Telecommunication Operators (ATO) wants the Antitrust Office (PMU) to set clear rules for operation of the upcoming alliance of dominant Slovak fixed line operator Slovak Telecom, a.s. and mobile operator EuroTel Bratislava, a.s. In the letter sent to PMU, ATO demands a guarantee of clear, transparent, and non-discriminatory relations with other companies, ATO chairman Vladimir Ondrovic informed.

Slovak Telecom, as a so-far 51-percent shareholder in EuroTel achieved a definitive agreement on the acquisition of the remaining 49-percent stake in the company from Atlantic West B.V. consortium, equally controlled by Verizon Communications and AT&T Wireless. The dominant fixed line operator will thus become the sole owner of the smaller of two mobile network operators in the country. “The key issue will be securing of access to wholesale products, otherwise it will be impossible to compete with the new combined operator”, claims Marek Chovanec, who in ATO represents Orange, the second mobile operator.

ATO demands that both mobile operators should have access to 450 MHz band, while so far only EuroTel uses this band. The combined operator should also not be given any other specific frequencies. “ATO will not object to the acquisition if the main obstacles to effective competition that may arise from it will be removed”, Mr. Ondrovic concluded.

The transaction has yet to be approved the respective EU competition authorities. As soon as it gets their approval, Slovak Telecom will gain exclusive control in EuroTel. The acquisition was estimated at EUR 250 million, however, the estimate was made sooner than EuroTel announced a 90-percent net profit growth for 2003. Both sides agreed not to reveal the purchase price.

Revenues from mobile and data services of EuroTel Bratislava grew 22.6 percent in H1 2004 to SKK 5.93 billion. This increase was primarily driven by growth in the number of both postpaid and prepaid customers. Total revenues of the mobile operator rose 21.7 percent y/y to SKK 6.3 billion during the first six months of this year. Earnings before interest, tax, depreciation and amortization (EBITDA) reached a record level of SKK 2.7 billion, up 23 percent y/y. At the end of June EuroTel reported a total of 1,740,082 clients. EuroTel reported net earnings of SKK 1.1 billion and EBITDA of SKK 4.432 billion in 2003.

Slovak Telecom showed a year-on-year drop in revenues by 5.6 percent to SKK 17.77 billion last year. The firm also posted a year-on-year drop of over 10.3 percent in EBITDA, which reached SKK 8.408 billion at the end of 2003. EBITDA margin fell from 49.8 percent in 2002 to 47.4 percent last year. On the other hand, net earnings of the company grew 8.1 percent to be at SKK 3.749 billion in late 2003. German Deutsche Telekom holds 51 percent in Slovak Telecom. Its other shareholders are the Slovak Transport Ministry (34 percent) and government privatization agency, the National Property Fund (15 percent).

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