TALLINN - A bid by the Scandinavian telecommunication conglomerate, TeliaSonera, to buy the state's stake in Eesti Telekom was rejected, with government officials saying they wanted significantly more cash for the strategic asset.
TeliaSonera, which already owns 48.79 percent in the company, approached the government with an offer to buy the state's 27.23 percent holding for 268 million euros - or 111.3 kroons (7.11 euros) in cash for each A-share and 11,130 kroons in cash for the B-share in Eesti Telekom.
In addition, TeliaSonera proposed to pay out 8 kroons per share before accepting the takeover offer, thus offering a premium of 12.3 percent over Eesti Telekom's weighted-average share price during the last 12 months.
The government said the offer was "below expectations."
"The offered price is clearly below our expectations. Our analysis shows that the state owns a stake in an attractive company, and this gives us grounds for asking a better price," Finance Minister Taavi Veskimagi was quoted as saying.
"It is surprising that TeliaSonera stuck till the end to the position that it can acquire a controlling stake in Eesti Telekom offering a price considerably below the market price," the minister observed. "Considering the present offer, it makes more sense to continue as a shareholder, earning every year a solid dividend income for the state budget."
Though the government was coy about how much it was after, analysts said that the Finance Ministry wanted up to 5 billion kroons, or 120 kroons per share.
"As finance minister my goal is to protect the interests of the state. The situation might change if TeliaSonera essentially adjusts its offer," said Veskimagi.
TeliaSonera was irked by the style of Estonia's response.
Kenneth Karlberg, Telia-
Sonera manager responsible for the Baltic countries, told the Finnish daily Kauppalehti on April 19 that it would have been better if the Estonian government had not immediately commented on the offer.
Karlberg said that he understood the government's reaction, but unfortunately its wishes were not realistic.
"We have no intention of overpaying, and the share has recently been overpriced," he said.
"There is not going to be any price rise," Karlberg stressed.
A final decision on the offer is not expected until June.
Meanwhile, Eesti Telekom's stock sunk on the news.
"Due to the buyout offer TeliaSonera made on [April 14], attention naturally focused on Eesti Telekom," Trigon Markets trader Mehis Raud told the Baltic News Service. "The price of the share dropped right at the start of the day to about 119.30 kroons and remained trading in that range for the whole day."
Commenting the company's first-quarter results released last week, analysts said they were concerned by a drop in Eesti Telekom's profit margins.
"The revenue growth was positive, but the margins could have been better. It seems that the competition in mobile communications is tougher than estimated, because despite a 12 percent revenue growth in this segment the margin dropped 4 percent," Sven Kunsing from Uhispank said.
TeliaSonera dominated the Baltic telecommunication market, and the company has plans to increase its stakes in Lattelekom, Latvia's fixed-line service provider in which it already owns 49 percent, though it is unclear when a sale will be arranged.
TeliaSonera's direct and indirect interest in the Latvian mobile operator Latvijas Mobilais Telefons amounts to some 60 percent.
TeliaSonera also owns 60 percent of the fixed-line operator Lietuvos Telekomas and a 90 percent interest in the mobile operator Omnitel.
