Privatisation a hard sell to Slovenians wary of foreign masters

Telekom Slovenije, D.d

08/04/2015 12:35

* Defence minister orders probe into Telekom sale impact 
    * Majority of Slovenians opposed to privatisation 
    * Sale of state firms part of crisis recovery plan 
 
    By Marja Novak 
    LJUBLJANA, April 8 (Reuters) - Plans to sell 
state-controlled Telekom Slovenia  TLSG.LJ  is testing the 
country's resolve to reshape an economy that two years ago 
nearly joined the likes of Greece and Cyprus in seeking an 
international bailout. 
    Privatisation has long been unpopular in Slovenia, where the 
state still controls about half of the economy, including 
telecoms and banks. People fear for jobs and other benefits if 
companies move into the private sector. 
    This mistrust of selling off the family silver to foreign 
buyers has come to a head in the past few weeks with the 
intervention of defence minister Janko Veber. 
    He ordered army intelligence to look into the likely 
consequences of the privatisation plan for Telekom Slovenia, the 
country's main telecommunications company, which has a market 
capitalisation of about 883 million euros.  
    Veber, a deputy leader of the Social Democrats, the junior 
partner in Slovenia's ruling coalition, believes the sale might 
affect national security.  ID:nL6N0WW1RT  
    "We might face a situation where the new owner may not be 
willing to adapt to our demands and expectations regarding 
critical infrastructure in the case of natural disasters and 
other dangers that could confront Slovenia," he told Reuters. 
    Veber's coalition members have accused him of trying to stop 
the sale on behalf of his party, which opposes selling state 
assets. He now faces a parliamentary vote on Thursday which 
could dismiss him from government. 
    Veber's party has threatened to quit the ruling coalition, 
which means Prime Minister Miro Cerar could struggle to drum up 
support for continuing the privatisation process. If Veber's 
party does leave, Cerar's majority in parliament will shrink to 
just one seat, seven months after he took office. 
    The political uncertainty has wiped 6.8 percent off the 
value of Telekom's shares since the turn of the year. Telekom's 
potential buyers include Deutsche Telekom  DTEGn.DE  and a 
number of private equity investors. 
         
    SUSPICIOUS MINDS  
    The row goes to the heart of Slovenians' suspicions of 
privatisation, borne of a deep affinity for the kind of state 
benefits enjoyed under socialist Yugoslavia. 
    The country of 2 million people, which gained independence 
in 1991, was initially a high-flyer, the fastest growing member 
of the euro zone when it joined in 2007, driven by exports of 
pharmaceuticals, kitchen appliances and Renault cars. 
    But exports were badly hit by the 2008 global financial 
crisis, which also exposed the weaknesses in an economy still 
50-percent government-controlled and where 60 percent of banks 
remain in state hands. 
    In late 2013, Cerar's predecessor Alenka Bratusek had to 
pour more than three billion euros ($3.26 billion) into the 
banks to prevent their collapse due to bad loans. Earlier that 
year, the government drew up a list of 15 state companies to be 
sold as part of a recovery plan agreed with the European Union. 
    Just three have been sold, airport Aerodrom Ljubljana, 
coatings and varnish producer Helios and laser producer Fotona. 
 
    ECONOMIC RECOVERY 
    Sixteen months on from the bank bailout, Slovenia's economy 
is recovering. Exports are rebounding and economic growth is 
forecast at 2.4 percent in 2015. The country's budget deficit is 
expected to fall to 2.9 percent of GDP this year from 4.9 
percent in 2014. The yield on a 20-year 1 billion-euro 
government bond issued last month was the lowest in Slovenia's 
history, at 1.553 percent.     
    But this improving outlook is putting more wind in the sails 
of those opposed to the privatisation plans. 
    Some 2,000 people protested in central Ljubljana in 
February, condemning the privatisation process as "theft" and a 
threat to jobs. 
    "It has to be stopped immediately because companies fire 
people after privatisation, while there's no further investment 
or development," protester Kira Cerjak said during the February 
demonstrations. 
    Latest opinion polls suggest most Slovenians remain firmly 
opposed. One published in January by daily newspaper Delo, had 
opposition to the sale of the 15 companies at 47 percent versus 
52 percent in November. But those opposed still outnumbered 
those in favour, which remains at about 36 percent. 
    Peter Stanovnik, a researcher at the Ljubljana-based 
Institute of Economic Research, said opposition stemmed from bad 
experience of previous privatisations that lacked transparency, 
and media preoccupation with sales that ended badly. 
    "It's clear that state management of companies is 
significantly worse than private management and we cannot kid 
ourselves that it can improve in the future since politics 
always has an appetite to put its own people in the management," 
Stanovnik said. 
    The International Monetary Fund and the EU have urged the 
government to speed up the process. But Lutz Roehmeyer, a 
director at Landesbank Berlin Investment, said Slovenia's low 
bond yields gave the government some breathing space. 
    "It should sell state companies only if the price is fair 
for both sides, and not at bargain levels." 
    A London-based investor, who is familiar with the  
privatisation process but declined to be named, said: 
    "People are looking at the financial figures of the 
companies on sale. What's going on with the government affects 
the sales process but not the value of the companies on sale. If 
the company's profit goes down, the value will go down."  
    ($1 = 0.9211 euros) 
 
 
 (Reporting by Marja Novak; Editing by Matt Robinson and Jane 
Merriman) 
 ((Marja.Novak@thomsonreuters.com; +386-1-5058805; Reuters 
Messaging: marja.novak.thomsonreuters.com@reuters.net)) 
 
Keywords: SLOVENIA PRIVATISATION/