Albanian Telecom Privatisation

complete

The proposed project consists in EBRD providing debt financing to a consortium consisting of Calik Enerji Telekomunikasyon Hizmetleri A.S. (“Calik Enerji”) and Turk Telekomunikasyon A.S. (“Turk Telecom” and together the “Consortium”) to (i) assist the Consortium in acquiring 76% stake in Albtelecom, the national incumbent operator, and (ii) partly finance the post-acquisition capital expenditure programme of Albtelecom. The government of Albania has signed a Share Purchase Agreement with Calik Enerji on 19 June 2007 to sell 76% of the shares of Albtelecom for a price of EUR 120,000,000. The incumbent’s privatisation is a necessary step to fully liberalise the Albanian telecoms market. Indeed, even though the market has formally been liberalised since January 2005, Albtelecom remains by far the dominant operator in the fixed-line market, where the fixed-line penetration remains below 10%, one of the lowest in Europe. The acquisition of the incumbent operator by foreign investors will strongly enhance modernisation of the telecoms services in Albania. In the fixed-line market, the project will enable Albtelecom to expand its network and increase fixed- line penetration. Moreover, the company will offer better internet services to a larger number of subscribers, and will therefore accelerate internet penetration growth. In the mobile market, Albtelecom will launch the third mobile operator in the country, Eagle Mobile, by early 2008. Launch of a third operator in a market presently dominated by Vodafone and OTE-owned AMC will strongly enhance competition. In addition to increasing private interests in Albania and dynamism in the sector, the project will enable some demonstration effects, since the other companies in Albania will have a significant example of a company restructuring and turnaround strategy implementation, as well as an example of introduction of new products and processes in the economy. Calik Enerjiis, a fully owned subsidiary of Calik Group, a Turkish conglomerate operating mainly in the textile, construction, gas distribution industries and financial services in Turkey as well as in neighbouring countries. For the privatisation of Albtelecom, the group formed a partnership with Turk Telecom, the Turkish incumbent telecoms operator. Involvement of Turk Telecom in the project will enable Calik Enerji to benefit from the knowledge and the expertise of the Turkish group, now operating more than 20 million subscriber lines in Turkey. Since 2005, Turk Telecom has been majority-owned by Saudi Oger Telecom, which acquired a 55% stake in Turk Telecom from the Turkish government for USD 6.55 billion. Albtelecom is the national incumbent operator in Albania with approximately 250,000 fixed-line subscribers, generating the equivalent of EUR 105 million revenues as of end 2006. EUR 75 million loan consisting of: EUR 155 million. The operation was classified C/1. An environmental assessment, including a site visit by the Bank’s Environmental Specialist to all the Company’s main facilities, confirmed that there is no significant environmental, health and safety or social issues associated with this operation and Albtelecom is in compliance with all relevant Albanian environmental, health and safety standards and regulations. Annual environmental reports received following the Bank’s original loan also confirmed that there have been no issues of concern associated with the Company's operation. In order to bring the Company in line with international environmental management practices for the telecommunication sector, a number of issues have been identified. These include the development of a formal environmental policy and a proactive management system in accordance with the international standard ISO 14001. EBRD has provided several TC programs in the telecoms sector in Albania, financed by France and the United Kingdom. Previous TC has included assistance with the drafting of the 1998 Telecom Law; assistance with the establishment of the independent sector regulator (TRE); and assistance with the administration of a publication competition for the 2nd GSM license. In addition to the above, the Bank’s Legal Transition Team is currently in the latter stages of organising a comprehensive TC to assist both the Government and the regulator to harmonise the telecom regulatory framework with the current European Union (EU) regulatory framework (in accordance with obligations assumed by Albania under its Stabilisation and Association Agreement with the EU). This forthcoming assistance will revise policy and law, update regulatory practices, build capacity amongst sector institutions and assist with implementation of individual components of the updated framework. While the TC has been approved by TC Committee of EBRD, discussions are still ongoing with the prospective donor (EC Tirana Delegation). H. Semih Ergur Director, AlbTelecom Project Head, Çalık Enerji Project Finance Tel: +90 (312) 207 7100 Email: semih.ergur@calikenerji.com