Bad Week for the Austrians
Someone once said “2 out 3 ain’t bad” – well that’s if you’re winning. 2 out 3 ain’t good at all if you’re losing, especially considering that the 3rd hasn’t been decided yet. I’m talking about Telekom Austria’s attempted Central European expansion into Serbia (lost), Slovakia (lost) and Bosnia (yet to be decided)
The loss in Serbia would have been a huge blow for the Austrian’s: I have been following the saga for the last couple of years and never have I thought that the Austrians would lose. Basically, the problem lay with the sordid recent past of Serbia. Mobtel was the largest cellular operator in a duopolistic market in Serbia, it was owned 49% by the state and 51% by Bogoljub Karic who appears to be one of Slobodan Milosevic’s cronies. Mobtel seems to have been run exclusively for the benefit of Karic and his family, tricks he performed included: taxes not paid to the government, mysterious purchases of property which were sold to members of family at discounted prices, dodgy network sharing deals in Kosovo. I’m sure this list is just the tip of the iceberg. Once the Milosevic era collapsed, one of the biggest tasks that the new government faced was the clean-up of Serbia business practices – Karic was target number one. He also didn’t help his cause with his interfering in politics. In 2005, Karic fled the country and sold his interest in Mobtel to a group of Austrian businessman led by Martin Schlaff. Schlaff has a really murky past and seems to specialise in being a honest broker in the sale of East European companies to Western Companies. In fact, the Telekom Austrian purchase of Mobitel in Bulgaria was brokered via. Martin Schlaff. I’m sure at this stage, Telekom Austria was 100% sure of winning Mobtel. However, the Serbia government stepped in and grabbed all the assets of Mobtel, renamed the company Mobi 63 and proclaimed they would auction it. Schalff somehow wheeled and dealed himself back into the deal with the help of the Austrian government and a compromise was reached.
On Monday the auction took place in Belgrade live on TV and the result was a Telenor victory with a final bid of €1,513m. They won by a meagre €20m from the Austrians who bid €1,493m. The Austrians have a chance of returning with a 3rd cellular license to be issued by the Serbian government, but the minimum price of €320m seems extremely steep to me.
The Austrians moved onto Slovakia where a “beauty contest” was ongoing for a third cellular license and the main candidates were Telefónica and Telekom Austria. The Slovakia market is basically a duopoly between Orange and T-Mobile and with quite high penetration. The capital of Slovakia is only 60km from Vienna and only the Danube separates Austria from Slovakia. However, Telefonica runs the old state PTT in the Czech Republic and has deep ties in Slovakia. So on Wednesday, Telekom Austria lost again. The embarrassing part is that Telekom Austria alledgedly outbid Telefonica with a bid of SKK250m (€6m) compared to SKK150m (€4m), however as the bid amount only 5% weight in the evaluation criteria, Slovakia had ultimately lost.
In both of these auctions, Telekom Austria could have won if they would have moved earlier: first in Serbia by buying the stake from Karic rather than allowing Schlaff to get involved and second in Slovakia by bidding in the previous two auctions when the government failed to sell the licence.
Next, the Austrians are moving onto Bosnia, let’s hope they have better luck this time…
The loss in Serbia would have been a huge blow for the Austrian’s: I have been following the saga for the last couple of years and never have I thought that the Austrians would lose. Basically, the problem lay with the sordid recent past of Serbia. Mobtel was the largest cellular operator in a duopolistic market in Serbia, it was owned 49% by the state and 51% by Bogoljub Karic who appears to be one of Slobodan Milosevic’s cronies. Mobtel seems to have been run exclusively for the benefit of Karic and his family, tricks he performed included: taxes not paid to the government, mysterious purchases of property which were sold to members of family at discounted prices, dodgy network sharing deals in Kosovo. I’m sure this list is just the tip of the iceberg. Once the Milosevic era collapsed, one of the biggest tasks that the new government faced was the clean-up of Serbia business practices – Karic was target number one. He also didn’t help his cause with his interfering in politics. In 2005, Karic fled the country and sold his interest in Mobtel to a group of Austrian businessman led by Martin Schlaff. Schlaff has a really murky past and seems to specialise in being a honest broker in the sale of East European companies to Western Companies. In fact, the Telekom Austrian purchase of Mobitel in Bulgaria was brokered via. Martin Schlaff. I’m sure at this stage, Telekom Austria was 100% sure of winning Mobtel. However, the Serbia government stepped in and grabbed all the assets of Mobtel, renamed the company Mobi 63 and proclaimed they would auction it. Schalff somehow wheeled and dealed himself back into the deal with the help of the Austrian government and a compromise was reached.
On Monday the auction took place in Belgrade live on TV and the result was a Telenor victory with a final bid of €1,513m. They won by a meagre €20m from the Austrians who bid €1,493m. The Austrians have a chance of returning with a 3rd cellular license to be issued by the Serbian government, but the minimum price of €320m seems extremely steep to me.
The Austrians moved onto Slovakia where a “beauty contest” was ongoing for a third cellular license and the main candidates were Telefónica and Telekom Austria. The Slovakia market is basically a duopoly between Orange and T-Mobile and with quite high penetration. The capital of Slovakia is only 60km from Vienna and only the Danube separates Austria from Slovakia. However, Telefonica runs the old state PTT in the Czech Republic and has deep ties in Slovakia. So on Wednesday, Telekom Austria lost again. The embarrassing part is that Telekom Austria alledgedly outbid Telefonica with a bid of SKK250m (€6m) compared to SKK150m (€4m), however as the bid amount only 5% weight in the evaluation criteria, Slovakia had ultimately lost.
In both of these auctions, Telekom Austria could have won if they would have moved earlier: first in Serbia by buying the stake from Karic rather than allowing Schlaff to get involved and second in Slovakia by bidding in the previous two auctions when the government failed to sell the licence.
Next, the Austrians are moving onto Bosnia, let’s hope they have better luck this time…
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