Croats in a frenzy ahead of telecom privatization


Croats are feverishly anticipating a “sure winner” with the mid-September initial public offering (IPO) of shares from the Croatian government’s stake in national telecom monopoly T-HT.

On Monday, September 17, the Croatian government will offer between 20% and 23% of the 35% it holds in the T-Hrvatski Telekom to citizens, presumably at a discount price. When national oil firm INA went on sale, IPO participants doubled their money quickly. With the overall trend in Croatia’s financial market, which has grown strongly over the past years, the upcoming privatization of T-HT has fuelled a nationwide frenzy. The price at which Croats would sign up for T-HT shares has not yet been revealed. Experts are predicting across a broad range of €27-47 ($37-50), depending on the generosity of the government.

With November 25 parliamentary elections looming, the discount - meaning the profit potential once the shares hit the markets in Zagreb and London on October 5 - may be “significant,” analysts estimate. “A 30% jump in price is possible, but it may also be 80%,” according to economist Branko Lokin. Other elements of the IPO have been released: Each voting-age citizen will have the right to subscribe for a shares package worth in the region of €5,100, and buyers who retain their shares from the IPO for a year will get one additional share for each 10 in their portfolio. The individual package could be smaller if the interest, as expected, overshoots the offer.

Croatian citizens will have priority, but institutional investors could also have access to a chunk of the shares, though the government has yet to decide which way to tweak the percentages. If they want more, larger investors will have to get T-HT shares on the market, presumably at a much higher price than in the IPO: exactly what the average Croat is counting on.

Convinced that they are in for major gains, people with money have been hounding poorer relatives for subscription rights, while those without money have been borrowing or selling possesions - cars, cows, anything - to raise the capital and have a shot at a speedy return on investment, local reports said. It also seems that most are planning a “take the money and run” approach, despite the 10% incentive. However, not everybody in Croatia is beside themselves with excitement. Almost drowned out in the cacophony of anticipation are the voices of some analysts warning that the telecom is not as sound an investment as the national oil company was.

T-HT already has a majority shareholder: German giant Deutsche Telekom, which has problems of its own, holds 51% in T-HT. Furthermore, unlike energy firms such as INA, the telecom sector has not been doing so well globally, skeptical analysts say. On the upside, T-HT would retain its virtual monopoly on fixed-line telephony and is the leading internet provider in the country of four million people.

Following the sale of the 20-23% this month, the Croatian government will retain 12-15% of T-HT’s capital. The state earlier transferred 7.0% to the war veterans’ fund and earmarked another 7.0% for company employees. However, only shares from the IPO will reach the market in October, government spokesman Ratko Macek said, while the remainder will remain “locked-up.” After INA and T-HT, the remaining major privatization in Croatia will be that of the national electricity corporation. (c&

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