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The Government of the Republic of Serbia

In the service of citizens

Serbia, Austria successfully conclude negotiations on Mobtel

Belgrade, 28 February 2006

Serbian Minister of Finance Mladjan Dinkic said today that negotiations with the Austrian consortium on all controversial issues in connection with the mobile telephone operator Mobtel, held under the mediation of Austrian Vice Chancellor Hubert Gorbach, have come to a successful conclusion.

At a press conference, Dinkic expressed satisfaction at the successful conclusion, and said that finally, after 12 years, there is a clean legal case concerning the first domestic mobile telephone operator.

He explained that it has been agreed that the Serbian and Austrian sides will form a new company, for which the state telecommunication and postal company PTT Srbija, as a representative of the Serbian side, will provide equipment, which it has the right to use having taken over the company’s accounts receivable from the two Austrian banks – Hipo Alpe-Adria Bank and Reiffeisen Bank. The Austrian consortium will take over €30 million accounts receivable from the company Ericsson, as input by the Austrian side in the newly formed company.

According to Dinkic, the investment ratio in the newly formed company will be 70% for the Serbian side and 30% for the Austrian consortium, while “a major multinational investment bank” will be Serbia’s partner.

After the formation of this temporary joint company, which will own all Mobtel's equipment, the Austrian consortium will by the end of March 2006 pay a 2.1 billion dinar dividend to PTT Srbija, said Dinkic.

He said that both sides agreed to withdraw from all court disputes in both domestic and international courts after the signing of the agreement on forming the new company, which is expected in the forthcoming weeks.

Dinkic said that in March the Serbian government will prepare all documentation and bring necessary decisions for calling an international tender for issuing the second mobile telephone operator license in Serbia, as well as for the sale of equipment which is now being used by Mobtel, including the user subscription database.

The international tender will be called in April 2006 at the latest, added Dinkic and expressed the expectation that many respectable world companies from the telecommunication sector will participate.

According to Dinkic, the minimal price for the total block of shares in this company will be set at €700 million. In that way the Republic of Serbia will get a minimum of €600 million if the company is sold for the initial price in the tender. "Mind you, that is a much larger sum compared to what the previous owner of Mobtel was planning to pay to the state", said Dinkic.

The minister explained that the €700 million initial price guarantees that the state will receive the funds that have not been paid into it's account in the past 12 years, since PTT Srbija claims the state was short changed by €700 million in dividends.

When it comes to the share of licence and user subscription database in the total value of the company, 40% of the company's value will go to the Serbian budget for the licence, while the buyer's share in the company will be 60%, said the minister and added that 70% of the buyer's share will go to the Republic of Serbia as privatisation revenue.

Hubert Gorbach, left, and Mladjan Dinkic

Dinkic explained that the tender for Mobtel will have two stages, which means that if two companies offer similar bids, in the second stage Mobtel will go to auction and sold to a buyer that offers the higher sum.

Liquidation of Mobtel will start on the same day the licence is granted. Until the end of that period, Telekom Srbija will maintain 062/063 network and provide a full service to its users. At a successful conclusion of the tender, these users will become an asset of a new Mobtel owner, explained Dinkic.

Dinkic expressed expectations that the international tender may be successfully concluded by mid 2006. Given the fact that the minimal sum the Republic of Serbia will receive for the licence is €280 million, it has been agreed that in a period of two and a half years it will not be possible to sell another licence to the third mobile telephone operator below the price reached at this tender, concluded Dinkic.

Austrian Vice Chancellor and Minister of Transport, Innovation and Technology Hubert Gorbach congratulated colleagues from the Serbian government on the successful conclusion of negotiations.

Gorbach recalled that within the framework of the first round of negotiations, in which Serbian Prime Minister Vojislav Kostunica also participated, the working group that dealt with important question in connection with the problem concerning Mobtel was formed. He stressed that during the talks the Austrian side confirmed its readiness to invest in Serbia.

“We shall attempt to ensure that the process of announcing an international tender is finished in the shortest possible period of time,” said Gorbach, and expressed his conviction that the Austrian company Mobilkom will prove to be efficient, as it has shown itself to be in other countries of the region.

Martin Schlaff

Serbian Minister of Economy Predrag Bubalo also expressed satisfaction that a number of problems, which had grown around Mobtel in the 12 years of its existence, have been solved in the very first step taken.

He especially expressed satisfaction that agreement was speedily reached with a country from where a great number of investors come to Serbia, and which is currently presiding the European Union.

Austrian investor Martin Schlaff said that as an investor he confronted serious problems when it comes to Mobtel. The basis for the company’s very existence was taken away when its license was revoked. He stressed that the contracts which caused the license to be revoked had been concluded long before he appeared as an investor.

"The positive thing is that the Serbian government always clearly stressed that objections concerning revoking the licence by no means concerned us as a company", said Schlaff.

"We have reached a concrete agreement, which in a few weeks time will be verified in writing", concluded Schlaff and pointed out that the greatest satisfaction for selling the mobile telephone operator belongs to its users.