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The Government of the Republic of Serbia

In the service of citizens

Serbia to get strong strategic partner by selling part of Telekom shares

Belgrade, 3 April 2010

Prime Minister Mirko Cvetkovic said in an interview for today’s edition of the Press daily that Serbia will sell a portion of Telekom Srbija shares because the state should not manage the economy.

The Serbian government’s official web site gives excerpts of this interview.

About the sale of Telekom Srbija:

In economics it goes without saying that private property is more efficient than state property. The sale of Telekom Srbija simply implies that the company will be transferred from a less efficient form of ownership to a more efficient one.

As for states that remained owners of their telecommunication companies:

Telekom Srbija will also remain partly state-owned. The state will retain its interests in this company through a considerable portion of 20%. However, when you speak about these states, you must bear in mind that they are highly developed countries with a tradition of corporate management, the possibility to properly compensate their managerial staff and ensure proper functioning of the system.

Should the state manage the economy?

The state should not manage the economy because we would then have a socialist society with a tendency towards communism. Arguments against the sale of Telekom are political rather than economic. You believe that the state should not sell something because it is not in its interest, but this argument could then be applied to any other activity.

What will Serbian citizens lose and what will they gain from the sale of Telekom?

Our citizens will get better service, a more varied proposition and possibly a cheaper package of services. The shares that will be distributed to citizens will also be worth much more. On the other hand, by selling Telekom shares we will get a strong strategic partner that could deal with the accelerated progress in this remit and provide enough funds for investment in order to develop the company, keep pace with the competition and secure a higher quality of service.

Transparency with the Telekom sale:

I explained to the press on several occasions what the state intends to do with Telekom. I once again highlight that Telkom’s buyer will be known after a transparent international tender.

Were there any talks with Deutsche Telekom (DT) about the sale of Telekom Srbija?

No one in the government talked about it. We are offering 40% of the company and in this way we will enable some other company, besides DT, to come into ownership of Telekom. If we wanted only DT, we would have offered 31% for sale. The package of 40% was well contemplated, because there will be three more sets of 20% each, owned by the state, the Greek OTE and Serbian citizens with Telekom employees.

Will the state be obliged to sell its share to whoever wins the tender?

We will decide whether we will do that and under what conditions.

How will the funds from Telekom’s sale be used?

It will be used in a transparent manner. Namely, a special fund will be formed with a special account in the budget, from which the funds will be used for projects. Decisions regarding what the money will be spent on will be made by the government. The Parliament will have to adopt a budget revision, because we will have to include these funds in the budget.

Will the money be used for pensions and salaries or political campaigns?

It will not.

The sale of the Serbian electric power industry EPS:

There are no plans for the sale of EPS, but we will start introducing private capital gradually by building new production capacity. We will start introducing a competitive environment in the electric energy system and thus exert a positive influence on corporate management. We have to perform this step by step, because we do not want to replace a state monopoly with a private one.

Strategy for the sale of Jat Airways:

We are working hard on the sale of Jat Airways, we have prepared a strategy on how to get out of the crisis and it will most likely be on the agenda of the first government session after Easter. The basic elements are to form a new company that will provide the same services as Jat Airways and take over its staff, jobs and market. We believe that this strategy will attract a large number of potential investors.

Will the company debts be paid by Serbian citizens?

No, the debts will be left to the old company and later on settled during the sale of the company’s assets. Whether it will be carried out through a bankruptcy procedure or otherwise, we will see.

Are you satisfied with what you have achieved and what you promised in your expose at the Parliament?

When I saw what was done by the end of 2009, I was pleased with almost all of it. The only exception is that because of the crisis the standard of living is poorer and this is the most important thing for our citizens. I would have been very satisfied if the crisis had not happened, but I am not quite happy as things stand. However, I know that we have done all we can to make sure our citizens are affected by the crisis as little as possible, and we have succeeded in that. You can see that, if you compare our economy with that of other countries. We have made several key steps in important areas and started moving in a good direction.

About the results achieved by the Serbian government:

The fact is that we have to do a lot of work and I say that both as a Serbian citizen and the Prime Minister. As a citizen, I can say that I have been granted a white Schengen visa and I can now travel freely. This is very important for me. Secondly, Serbia is now a respected country in the world. High officials from other countries are visiting Serbia, it is taking part in serious negotiations. However, my standard of living is poorer, but then again, others also have to put up with this aspect. All things considered, I have to give a positive, rather than a negative assessment.