Telekom officials announced at a Feb. 10 press conference that shares in the newly privatized Eesti Telekom went for 85 kroons ($6.15), the highest possible price in the 67 to 85 kroon range set before the subscription process began. The sale was 18 times oversubscribed.
The sale raised 3.061 billion kroons for Estonia, more than doubling the size of the Tallinn Stock Exchange and hopefully raising the profile of Estonia with international investors.
"This is an outstanding success both for the company and the country of Estonia," said Matthew Westerman, from ABN Amro Rothschild, one of the global coordinators of the deal. Uhispank and Talinvest Suprema Securities were the local coordinators in Estonia, Latvia and Lithuania.
Although the issue was heavily oversubscribed, Westerman said this wasn't reason to suspect that Eesti Telekom should have set the price range higher.
"We've got to be sensible," said Westerman. "We do not want an unreasonably high share price against which the company cannot compete." Shares were listed Feb.10 on both the Tallinn and London stock exchanges as Global Depository Receipts. One GDR is worth three regular shares.
Trading of the Telekom shares brought new life to the previously stagnant Tallinn Stock Exchange when trading of the shares began. The shares opened up at 100 kroons per share, climbed to 132 kroons per share Feb. 11, and when TBT went to press the share had closed at 119.75 kroons.
The sale raised the market capitalization of the stock exchange from about 9 million kroons the day before the shares were listed to approximately 18 million kroons one day later. It also shifted the focus away from the banking stocks that used to dominate the exchange.
Under the privatization plan ironed out by the Ministry of Transport and Communications, 49 percent of the shares were sold during a subscription process that began Jan. 25 and ended Feb. 9.
Within 90 days of the end of the subscription process, the company will be restructured and new shares will be issued to Sonera and Telia, the two Nordic Telekom partners who have been with the company since 1992.
After the restructuring, Sonera and Telia will hold 49 percent of the company, the government will hold 27.3 percent and the remaining 23.7 will be held by private shareholders.
Minister of Transport and Communication Raivo Vare said he was particularly pleased with the number of local investors who bought shares.
"We tried to boost the Estonian market and expand the investor base. Domestic small investors will be preferred to international investors," said Vare. However, many of those small investors are out of the market by this time, having sold their shares within the first few days of trading to reap a 30 percent profit.
Since the share issue was oversubscribed, Telekom officials had to decide how to allocate the shares to investors. All orders for less than 1 million kroons were met in full and the percentage allocated decreased as the number of shares requested increased, meaning that institutional investors who requested more shares were not fully satisfied.
According to a report in the business daily Aripaev the Securities Inspectorate is investigating whether Uhispank used its knowledge about the allocation to benefit its clients. Uhispank's clients were able to get all the shares they wanted by sending in each order individually instead of one order for the bank's clients.
Hansapank and other banks in the region submitted all their customers' requests in one order, which pushed them over the 1 million kroon level.
The Telekom team was pleased with the number of international investors from outside the Nordic and Scandinavian region who requested shares; 29.7 percent were from Great Britain and 21.5 percent were from the United States.
Now that the telecommunications privatization is largely completed, the railway and energy sectors are the only industries left to be privatized.
But both have been on the negotiating table since 1996 and have gone nowhere.
"With all these processes, the problem has been the political bargaining," said Vare. He added that investors paid close attention to the move by Parliament to designate telecommunication as a strategic enterprise, 51 percent state-owned.
According to Prime Minister Mart Siimann, the majority of proceeds from the sale will be placed in the stabilization fund in a German bank and part will go towards the state budget.