By Eric Jansson
Published by Financial Times, 20 December 2006
When a foreign investor bought Republika Srpska’s fixed-line and mobile telecommunications operator this month, privatisation officials in Bosnia-Herzegovina’s Serb-dominated sub-state cheered. The “entity” government set a minimum price of €400m for a 65 per cent stake in Telekom Srpske, and the winning bid came in at €646m.
It was a record-breaking privatisation price for Bosnia-Herzegovina, a country hungry for foreign investment. So why do Bosnians grumble about it?
As with most disputes in the country, it boils down to ethnic rivalry.
Privatisation sales are carried out at the entity level – by separate agencies in Republika Srpska and in the Federation, the entity dominated by Bosnjak-Muslims and ethnic Croats. Within the Federation, smaller sell-offs are the preserve of individual cantons. Big sales, therefore, boost overall revenue and investment but reinforce the country’s internal divisions. Few deals have been more sensitive than Telekom Srpske’s.
A significant reason is the buyer, Serbia’s state-owned operator Telekom Srbija.
For many non-Serb citizens, Belgrade’s involvement arouses deep suspicions. Conspiratorially- minded critics say the sale will help security services in Belgrade to listen in on Bosnian telephone conversations.
Vojislav Kostunica, Serbia’s prime minister, says the deal is all about smart investment, especially as Belgrade intends to sell Telekom Srbija to a global telecom operator.
Yet Mr Kostunica also has a rare knack for stoking nationalist fires with vague and muted rhetoric. “It is natural for Serbia to occupy the position that belongs to us,” he said of the telecom acquisition at a meeting with Milorad Dodic, prime minister of the Bosnian Serb statelet.
Telekom Srpske’s impressive sale price has also raised questions about non-business considerations behind the Serbian bid. The only other bidder, Telekom Austria, offered just €467m.
Vladimir Mackic, director of privatisation in Republika Srpska, says there was no political interference in the Telekom Srpske sale. “Our politicians want us to work according to the law,” he says.
He says he was disappointed six other bidders dropped out before the final round.
Policymakers in the Federation are also, by their own admission, upset that Mr Dodik’s privatisation team was quicker to the draw. BH Telekom, one of two Federation-based operators, is also slated for privatisation.
Despite their entity-based ownership, all local operators are licensed to offer mobile telephony throughout Bosnia-Herzegovina. With the injection of capital from Belgrade, the Bosnian Serb network will gain an early lead in the race to capture the whole mobile market. This reduces BH Telekom’s market value.
Before the Federation moves forward on BH Telekom, privatisation officials there aim to sell at least two other big properties, the civil engineering firms Energoinvest and Hidrogradnja.
While the entity has already sold 71 per cent of all its companies slated for sale, these have been mostly small firms and represent only 40 per cent of the earmarked assets.
Big sales in the Federation have included a steel mill, now owned by Mittal Steel, and a cement factory scooped up by Germany’s Heidelberger Zement, but nothing big sold this year.
Meanwhile, Mr Mackic’s team is looking ahead to the Serb statelet’s next big thing: the public power utility, Elektroprivreda.
Privatisation of the Bosnian Serb power system also, in effect, began this month. The decision by CEZ, the Czech power utility, to invest €1.5bn in the sub-state’s power network introduces new ownership into the sector.
By contrast, the Federation’s recent energy sector privatisation looks small. MOL, the Hungarian oil company, and its Croatian affiliate INA in August purchased a 67 per cent stake in Energopetrol through a €110m deal involving recapitalisation and direct payments.
That also raised tensions within the Federation, as the government in Croatia controlled INA at the time. Zagreb has since sold off its INA stake, but Bosnjak lawyers are still trying to undo the Energopetrol deal.