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The Government of the Republic of Serbia

In the service of citizens

"Telekom Srbija" buys "Telekom Srpske" for €646 million

Belgrade, 5 December 2006

Serbian Prime Minister Vojislav Kostunica stated today that "Telekom Srbija" purchased today "Telekom Srpske" at a transparent tender for €646 million and explained that from a historical point of view that is the greatest investment of a Serbian firm, and individually the greatest investment of "Telekom Srbija".

From left: Milorad Dodik, Vojislav Kostunica and Drasko Petrovic

At a press conference Kostunica stressed that this investment, apart from opening the door to "Telekom Srbija" for its expansion in the region, is important for the development of Republika Srpska.

He said that "Telekom Srpske" is a profitable company which in the period from January to September this year made a profit of €31 million, which is 33% more than planned.

On the other hand the Serbian Prime Minister explained, this entire business deal fits in with the policy of the two governments - of Serbia and Republika Srpska, which from the very beginning has been clearly formulated and entails strengthening of economic ties and improvement of cooperation between Serbia and Republika Srpska.

Kostunica recalled that to that end the Agreement on establishing special parallel ties between Serbia and Republika Srpska was signed in September this year which refers to a number of business activities, investments and plans. He added that this Agreement is just an idea and a project which is being implemented through such a big undertaking as this.

Explaining what this undertaking means for Serbia, Kostunica recalled that foreign investment to Serbia reached €4 billion this year and that this is the first time that Serbia has invested a very large amount of money into Republika Srpska.

That speaks about the power of the Serbian economy and its ability not only to attract foreign investors with its stability and security of its legal and economic conditions, but also to invest in other countries.

Prime Minister of Republika Srpska Milorad Dodik expressed satisfaction with the successfully conducted privatisation of “Telekom Srpske”, and with the fact that “Telekom Srbija” offered a price which eliminated competition from other bidders at the tender.

Dodik said that the privatisation process of “Telekom Srpske” was conducted in accordance with law, and not a single objection was raised during the process of preparing the privatisation programme and the conducting of the tender, which means that “Telekom Srbija” succeeded in beating competitors at the international tender which was held in accordance with the highest standards, regional as well as European.

He stressed that the government of Republika Srpska expects that the contract will be signed as soon as possible making “Telekom Srbija” owner of 65% of shares in “Telekom Srpske”.

Dodik said that a large number of people in Republika Srpska are satisfied with the fact that the buyer of “Telekom Srpske” is “Telekom Srbija”, and added that this holds more than just economic significance for people.

All this was possible to do in a very transparent and acceptable manner above all because the governments of Serbia and Republika Srpska did a lot during the previous year on legalising forms of cooperation between the two countries, which cannot be brought into question by anyone in the region, stressed Dodik.

He added that the entire process was conducted through a realistic healthy regional economic relationship, stressing that this is something which must be upheld absolutely.

According to Dodik, this is concrete cooperation which contributes to strengthening the agreement on establishing parallel relationships, and it was possible to realise such cooperation only through respecting a completely transparent process.

Director General of “Telekom Srbija” Drasko Petrovic stressed that acquisition of “Telekom Srpske” was an extraordinary business move, which provides the opportunity to create a large telecommunication network in the region and allows “Telekom Srbija” to become an important regional operator in the entire Balkans.

Petrovic said that owing to this transaction “Telekom Srbjia” can say from today that it has 7.5 million users of fixed and mobile networks, and aims to realise the “long dreamt dream of the company, and Serbian economy” to have 10 million users within the next three to four years, which is the number of users of Telekom Austria.

This investment continues the process of significantly increasing the value of “Telekom Srbija” and in comparison to the financial transaction from the end of 2002, the value of the company has increased six times, and now it is worth more than €3.5 billion, said Petrovic.

He added that every such regional activity will increase proceeds and profit for “Telekom Srbija”, and also improve its strength and position as a competitor in the market.

Speaking on the profitability of this investment worth €646 million, Petrovic said that projected proceeds of the “Telekom Srpske” in 2007 are approximately €200 million, and the profit rate is some 20%, which means that “Telekom Srbija” will recover the investment within less than ten years only through the profit of “Telekom Srpske”, as well as all expenses on loans for the investment, as a result of being in business in the entire market of Bosnia and Herzegovina.

According to Petrovic, “Telekom Srbija” will provide a reliable network, new services and cheaper rates to all users on the territory of Bosnia and Herzegovina.