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Public Hearing: “Environmental Management Framework for Kosovo Energy Efficiency Renewable Energy Project” 08 April 2014 starting at 9:00h, at MED’s offices. (download document)
 

PROJECT IMPELEMENTATION UNIT


1. What has the previous Government undertaken?


- Based on the wider strategy of the Government of Republic of Kosovo on the participation of the private sector in publicly-owned enterprises, on 23 December 2008, the Government of Republic of Kosovo (GoK) issued a decision (02/41) on the establishment of an Inter-Ministerial Committee (IMC) to analyze options for ensuring the participation of the private sector in PTK J.S.C., including the eventual privatization of all or some of its business units. 
- In accordance with the preset project management structure, the Committee selected a Transaction Advisor and established the Project Implementation Unit. 
- Upon conclusion of all studies and analyses, the Inter-Ministerial Committee proposed to the Government of Kosovo to issue a decision to privatize 75% of PTK shares and the separation of postal services from the remainder of PTK.


2. Which activities were undertaken by the current Government? 

The new government of the Republic of Kosovo issued, on 2 March 2011, a decision to reestablish the Governmental Privatization Committee, which continued to conduct the privatization process, based on the Government-approved structure.

The GPC comprises:

Mr. Besim Beqaj, Minister of Economic Development, Chair;
Ms. Mimoza Kusari-Lila, Minister of Trade and Industry, member;
Mr. Fehmi Mujota, Minister of Infrastructure, member;
Mr. Nenad Rasic, Minister of Labor and Social Welfare, member;
Mr. Bedri Hamza, Minister of Finance, member. 

- The Government Committee is conducting the process of privatizing 75% of PTK shares. 
- On 31 March 2011, the Assembly of Kosovo endorsed the Government’s decision to privatize 75% of shares.


3. Is transparency guaranteed?

- The entire privatization process is based on the principle of transparency and equal access for all potential investors. 
- The project is founded o the highest international standards for such transactions.


4. What is Kosovo selling? What does the sale of 75% of PTK shares means?

- The Kosovo Post is separated from PTK, whereas 75% of the shares excluding the Post will be sold, meaning that 75% of shares in the other two business units, Telecom (fixed telephony) and Vala (mobile telephony) will be sold. 
- 25% of shares remaining under state-property will be monitored by state representatives in the PTK Board and all details will be regulated in the sale-purchase agreement.


5. Why is PTK being sold? What are the expected benefits?

- Privatization of public enterprises comprises a structural reform of Kosovo’s economic system. It is the most important step in the road to modernizing our society. 
- The PTK sale will make possible the introduction of modern managerial and technological experiences both in the company and around it. This will, in turn, result in lower prices and higher quality for Kosovo citizens.
- PTK privatization aims to generate income for the Kosovo budget, at a time when numerous capital investments are made in Kosovo in all spheres, especially in infrastructure. 
- This privatization, similar to other privatizations of publicly-owned enterprises, aims to send a signal to serious international investors, informing them on Kosovo’s economic sustainability and favorable business environment. - Attraction of long-term private investments in Kosovo, which will greatly support the improvement of our international image. 
- Provision of investments in the company and its preparation for future competition in a free liberalized market. 
- Fulfillment of requirements set forth by the European Union, WTO and obligations towards IMF. 
- As regards technological development and services provided in the telecom market, Kosovo stands behind Europe and the Balkans region. We have still not introduced mobile data services 3G/4G, which would represent a key income source for the investor and a potential for investment concentration. 
- This would enable the increase of the value of potential shares held by the Government of Kosovo over time. 
- Synergies, such as rates of long-distance calls, provide for the possibility to decrease tariffs for incoming and outgoing calls and better possibilities for collecting international roaming taxes. 
- This will ultimately be beneficial for PTK consumers and Kosovo citizens. Tariff pressure will certainly increase the competitiveness of the market.


6. Why sell a profitable company?  

-
 The state will continue to keep 25% of shares. This means that 25% of future profit will be shared by Kosovo citizens. 
- PTK, even after the introduction of private capital, will continue to employ Kosovo citizens, pay taxes and fees, pay its local vendors, and, most importantly, continue to invest in Kosovo. 
- Each business decision is taken based on the current performance of companies and expectations for the future. 
- Company income has decreased after market liberalization and IPKO’s entrance in the market, and this was expected. Bearing in mind this fact, any delay in privatization will result in decreased PTK value.


7. What are the risks of maintaining the current status quo?

- Continuous erosion of shareholder’s value, resulting from aggressive competition in all market segments (fixed telephony, mobile telephony, IPTV and internet). 
- Inadequate coverage of services and lack of quality standards, which result from continuous inefficiency of operations, hinders Kosovo’s economic development and competitiveness. 
- An utterly wrong signal for international investors. No country can be developed without obtaining its share of international investments.


8. Why now? Is it the right time to privatize?

-
 The global economy has overcome the crisis threshold. Insecurities will continue to appear for at least the upcoming 3-5 years. 
- On the other hand, economic indicators show that Kosovo’s economy is growing by around 5% per year, between 2009-2011, while an additional 5% growth is envisaged in 2012 (marking the highest growth level in the region). 
- This fact makes Kosovo, as a developing country, more competitive than the other countries. 
- After the economic growth in other competitive markets commences, other investment possibilities will compete with PTK. This will diminish PTK’s value. 
- The global telecommunication industry is approaching saturation and, as a consequence and especially in developed markets, it is facing diminished margins due to the high level of competitiveness. 
- Clients are becoming more price-sensitive and the market is mostly oriented towards price competition – as most operators have access to the same technology and are able to provide similar services.


9. Why sell 75% of the shares?

- Strategic investors seek to have managerial control in the company, in order to be ready to invest and manage their investments. Such control is guaranteed through the ownership of 75% of shares. On the other hand, the Government of Republic of Kosovo continues to hold 25% of the shares, meaning a significant portion of PTK shares, which it will be able to sell at an even higher price, after their value increases.


10. What happens to the staff? 

-
 The Government will guarantee the employment of all PTK staff for three years after privatization. 
- PTK is expected to continue its further development, and as such will continue to be one of the most valuable employers in Kosovo even after the elapse of the three-year period.


11. What will happen to the Post? 

-
 Kosovo Post is established as a new publicly-owned enterprise by the Government of Kosovo, and functions completely separately from PTK since August 2012. 
- The separation of Post from telecommunications services was recommended by all analyses conducted to date and represents a regulatory requirement. 
- Kosovo post holds all PTK’s immovable properties and employs around 1,000 staff members. 
- Bearing in mind the services that the Post will provide for PTK and its normal business activities, it will function adequately and be economically sustainable.


12. What are the experiences of other countries?

-
 Public companies worldwide have a less successful track-record than private companies providing telecommunication services. 
- Around the globe, the absolute majority of countries have privatized their telecom operators and liberalized their markets. Therefore, we will not be an exception to this rule, as this is the right policy to follow.


Please see the table below.

Telecom privatizations in the countries of Central and Eastern Europe

Country

Telcom

Year

Method

Country

Telecom

Year

Method

Albania

Albtelekom

2007

Sale by tender

Latvia

Lattelecom

1993

Sale by tender

Albania

AMC

2000

Sale by tender

Lithuania

Lietuvos Telekomas

1992

Sale by tender

 

 

2008

Sale by tender

 

 

2000

Stock exchange

B&H

Telekom srpske

2002

Mass voucher

Macedonia

Maktel

2001

Sale by tender

 

 

2007

Sale by tender

Montenegro

CG Telekom

2000

Mass voucher

Bulgaria

BTC

2004

Sale by tender

 

 

2005

Sale by tender

 

 

2005

Stock exchanger

Poland

TPSA

1998

Stock exchange

Croatia

HT

1999

Sale by tender

 

 

2000

Employee options

 

 

2001

Sale by tender

 

 

2000

Sale by tender

 

 

2007

Srock exchange

 

 

2001

Sale by tender

Czech republic

Cesky

1994

Mass voucher

 

 

2003

Stock exchange

 

 

1995

Sale by tender

Romania

Romtelecom

1998

Sale by tender

 

 

2005

Sale by tender

Serbia

Serbian telecom

1997

Sale by tender

Estonia

Esti telekom

1992

Sale by tender

Serbia

Mobtel

2006

Sale by tender

 

 

1999

Stock exchange

Sllovakia

Slovak telekom

2000

Sale by tender

Hyngary

Matav

1993

Sale by tender

 

 

 

 

 

 

1995

Sale by tender

 

 

 

 

 

 

1997

Stock exchange

 

 

 

 

 

 

1999

Stock exchange

 

 

 

 

 

 

 

 

 

 

 

 

 

13. Which companies have prequalified for the privatization of 75% of PTK shares?

- In its meeting held on 17 August 2012, the Government Committee on PTK Privatization adopted the list of companies prequalified to participate in the tender for the purchase of 75% of PTK shares.

They are:

Albright Capital Management LLC, in cooperation with Portugal Telecom
Columbia Capital in consortium with ACP Axos Capital Gmbh, in cooperation with British Telecom – Poland (owned by British Telecom)
M1 International Limited 
Turkcell
Twelve HORNBEAMS (Innova), in consortium with Avicenna Capital LLC, in cooperation with Sofrecom (part of France Telecom)


Profiles of companies prequalified for the privatization of PTK

Albright Capital Management (ACM), in cooperation with Portugal Telecom

Albright Capital Management LLC was established in 2003.
Since 2007 the company has raised investment funds in excess of 600 million USD. The company manages assets worth over 700 million USD. The company manages various investment funds in numerous countries around the globe.
ACM entered the competition to purchase PTK shares in cooperation with the Portugal Telecom, with regard to operational and management arrangements. Portugal Telecom operates in many countries worldwide and has annual income of around 4 billion euro.

Twelve Hornbeams, UK (Innova Capital) and Avicienna Capital, UK, in cooperation with Sofrecom (part of France Telecom)

Twelve Hornbeams is established by Innova Capital.
During the last 17 years, Innova Capital has invested in a number of significant telecom operators, including among other GTS Central Europe, Energis Polska, Voxtel (Orange Moldova), Mobitel, etc. and has invested over 500 million euro in various countries of Southeast Europe. In this region, this company also manages assets worth over 900 million euro.

Avicienna Capital, is a private direct investment firm with offices in London and Istanbul. Established in 2003, this company invested in various strategic sectors in Asia and Europe. Avicienna is seeking to expand its investments in telecom and energy.

These two companies have entered the competition for the purchase of PTK shares in cooperation with Sofrecom (part of France Telecom).

Columbia Capital, USA and Axos Capital, in cooperation with British Telecom Poland (part of British Telecom)

Columbia Capital is an investment fund focusing on information technology, telecommunications, internet, media, etc. Established in 1989 it has invested in over 130 companies of this sector around the globe. It manages over 2.5 billion USD.

Axos Capital partners is a joint shareholding venture, comprising leading international investors in technology and telecommunications, with private capital of around 4 billion USD.

Columbia Capital and Axos Capital are competing in the PTK transaction in cooperation with British Telecom. 

M1 Group, Lebanon

M1 Group is an investment group with vast experience in investments in different sectors, including telecommunications, aviation, energy, construction, etc. It was established in 1960 and started investing in the telecom market since 1980, with the largest telecommunication company investing being Investcom.

Turkcell, Turkey

Turkcell is the largest operator of mobile telephony in Turkey. It provides telephony and internet services through its global communication network. The company also provides other services in the sphere of telephony and internet. It operates in nine countries and serves over 65 million consumers. Its income during last year exceeded 4 billion USD.

KEY ECONOMIC INDICATORS

FDI 2013 €258.5 mil. IÇK 2013 1.8% BPV 2013 3.2 % BPV (Vler.) 2013 €5,155 mil. Remittance T3 2013 € 620.8 mil. GDP per Capita 2013 €2,773 Public Debt (% BPV) 2013 9 % Indikatorët 2012

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