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Serbia’s Government Testing Waters for Possible Telekom Sale

Serbia is testing investor interest for its dominant telecommunications provider Telekom Srbija AD before potentially offering it up for sale.

The government has made no decision to call a tender to sell the company, Serbian government spokesman Milivoje Mihajlovic said by phone today, after the Ministry of Trade and Telecommunications said Turkey’s Dogus Group and Sabanci Group are interested.

As part of its plans to trim the budget gap and help the Balkan state recover from two recessions in three years, Prime Minister Ivica Dacic’s government plans to sell or close 179 state-owned enterprises for savings of 750 million euros ($1 billion) a year. A potential Telekom sale -- the cabinet has said it would accept no less than 2.5 billion euros for the entire company -- would be in addition to that.

“There are talks on possible strategic partnership deals, but it’s all about feeling the pulse of investors,” Mihajlovic said by phone today. “The government has not yet adopted any decision to sell Telekom Srbija.”

In April, Belgrade newspaper Blic wrote that Moscow-based AFK Sistema (AFKS) JSFC is also interested, as is Abu Dhabi-based Emirates Telecommunications Corp., or Etisalat.

Serbia consolidated ownership of Telekom Srbija in 2012, buying back a 20 percent stake from Hellenic Telecommunications Organization SA. (HTO) An attempt to sell a majority stake in the state phone company in 2011 failed, when Telekom Austria AG (TKA) offered 1.1 billion euros, less than the minimum price of 1.4 billion euros set by the government.

The previous cabinet set the market value of Telekom Srbija at 2.27 billion euros, promised to give away 22 percent of the equity to company workers and Serbian nationals and list Telekom on the Belgrade stock exchange. Since that cabinet’s collapse last year, the plan has failed to materialize. Telekom’s 2012 net income almost halved to 11.25 billion dinars ($131.7 million) from 22.27 billion dinars in 2011, as assets shrank and long-term liabilities and spending expanded.

To contact the reporter on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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