Telia may buy Sonera's holdings in Baltic telecoms

  • 2001-09-13
  • Kairi Kurm
TALLINN - Rumors are spreading that Finland's Sonera may sell its holdings in Estonian telecommunication companies to Swedish rival Telia.

The rumors started when Jaan Mannik, chairman of the board of the Estonian telecommunication company Eesti Telekom, mentioned Telia's possible interest in Sonera's holdings at a meeting between Eesti Telekom directors and Estonian investment banking analysts on Aug. 29.

Eesti Telekom later denied the rumors in a statement issued to the stock exchange. In the statement, Mannik said he had been misunderstood and would never comment on the future activities of the strategic owners. He said instead that he had been talking hypothetically about a possible future scenario in connection with changes in the telecommunication sector, but this had been taken as fact. "I can assure you, that at the present moment, we have no reason whatsoever to say Sonera might be planning to sell its stake in Eesti Telekom," said Mannik. "This is obviously a case of overblown speculation."

Telia and Sonera own 24.5 percent of Eesti Telekom each. The state of Estonia holds 27.28 percent of the shares and the rest are freely traded on the Tallinn Stock Exchange.

Several investment banks have voiced suspicion that Sonera might be planning to sell its stakes in Baltic telecommunication firms to Telia or some other concern. According to the business daily Aripaev, the investment bank Goldman Sachs advised the troubled Sonera to sell its shares in three Baltic and two North American companies, which would bring in 987 million euros ($881.25 million).

But Urmas Riiel, analyst from Hansabank Markets, who also participated in the meeting, was skeptical. "If they wanted to sell their shares, they would announce this through the stock exchange first," said Riiel. "Our leading analysts are big speculators. I believe that Jaan Mannik was speaking hypothetically, as he said."

According to the analysts Sonera has a 62 billion kroon ($3.6 billion) debt that it might have to cover by selling its shares in the Baltic telecommunication companies.

Sonera and Telia also share a 60 percent stake in the Lithuanian telephone company Lietuvos Telekomas. Telia does not have a stake in the Latvian telecommunication company Lattelekom, but it does not mean it would not like one, believes Veikko Maripuu, analyst from an investment bank Suprema. "It would make the company's strategy exact and transparent," he said. "They are competitors, so their visions do not always coincide with each other."

Sonera has invested a lot in such forthcoming projects as the third generation mobile networking, while Telia has more conservative plans.

Sonera's share price has decreased by 97 percent and Telia's share price by 40 percent in a year. Eesti Telekom's share price has decreased by 50 percent in the same period, mostly due to the overall shrinkage of the telecommunication sector.

But Krister Bjorkqvist, director of finance at Eesti Telekom, defended her company's record: "Our share price has decreased less than the average in this industry. We had good results in the first half of 2001, with a strong balance sheet and good cash flow. I believe the price should go up."

The company reported a 499 million kroon profit on a 2.1 billion kroon turnover in the first six months of 2001 and is planning to invest over 1 billion kroons in 2001.

Eesti Telekom has paid very good dividends in the last two years: in 1999 it paid 4 kroons per share and in 2000, 5.5 kroons per share.

Kristel Kivinurm, head of sales and trading at the investment bank Trigon, said the shareholders had decided at a meeting in May to buy back some of the company's shares because the company was overcapitalized. The council has yet to confirm the decision.

On Sept. 7 Eesti Telekom's shares cost 47 kroons, a "desperately low" price compared to the March price of 155 kroons per share, according to Maripuu.

Shares in Eesti Telekom were launched on the Tallinn Stock Exchange in February 1999 and cost 85 kroons each at the time.