U.S. partners in a Slovakian phone venture are confident they can restructure their company to meet new license qualifications unexpectedly created by the Slovakian government.
Slovakia is scheduled to issue two new Global System for Mobile communications licenses Aug. 27. One license was promised six years ago to current cellular operator Eurotel, and the other recently was awarded to a France Telecom consortium.
However, complications for U.S. bidders started when the Slovakian government changed requirements regarding company structure and foreign ownership during the recent GSM licensing process.
Eurotel is 51 percent owned by government operator Slovenske Telekomunikacie s.p. (ST) and 49 percent owned by AWBV, an equal partnership between Bell Atlantic International Wireless and U S West International.
“We expect to come to an agreement soon and go forward and build a competitive system,” said Dick Lockwood, vice president and regional manager of Europe and Asia for Bell Atlantic International Wireless.
Eurotel was formed in 1990, when Slovakia was still a part of Czechoslovakia. It was licensed to provide analog cellular and data networks throughout the nation. Not only did Eurotel acquire the licenses then, but AWBV put down a substantial deposit that would assure future GSM licenses for Eurotel-namely, $10 million for a future Czech license and $5 million for a future Slovak license.
Strong nationalist feelings existed before Czechoslovakia broke into two nations in 1993, so the licenses are managed through separate agreements, one for the Czech Republic, one for Slovakia.
Since the Czech Republic allows 49 percent foreign ownership, Eurotel recently won a new GSM license there and last month launched a GSM system.
But Slovakian officials have reduced the foreign ownership allowance from 49 percent to 40 percent, which means the U.S. companies must give up 9 percent of Eurotel.
The government also now requires the license holders be a joint stock company; Eurotel is a limited liability company.
Current discussions evolved around these points, Lockwood said. Rather than restructure Eurotel, it may be easier to create a new company where ownership would be structured at 60 percent and 40 percent; then the value of the 9 percent must be determined. Also, AWBV has paid $5 million plus interest for the future Slovakian GSM license, and at 40 percent, AWBV’s share may be more like $3.2 million.
“We have to agree to get that money back or it should be settled in the business,” he said. The U.S. companies may have to give up management control of the Slovak operations as well.
AWBV is confident the matter will be resolved and Eurotel or a new Eurotel company will receive the GSM license this month. The company hopes to have service up in the nation’s capital, Bratislava, by year end, and service throughout the nation by early 1997.
Eurotel’s head-to-head competitor is Slovtel, which is 35 percent owned by France Telecom Mobiles International. Like Eurotel, Slovtel expects to launch service by year end, beginning with Bratislava, Kosice and Banska Bystrica. The Slovtel consortium includes several state-owned utility companies and a 29 percent silent partner.
