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By Hasmik Mkrtchyan
YEREVAN, Dec 9 (Reuters) - Armenia said on Tuesday an agreement by Greek telecoms company OTE to buy 90 percent of Armenian telephone operator ArmenTel would raise international investor interest in the country. "This privatisation will raise interest and trust in Armenia. This is the biggest one so far and it was done professionally," said Vahram Avanesyan, an adviser to Prime Minister Robert Kocharyan.
"This is our first international tender, and if ArmenTel hadn't been sold, then it would have been doubtful whether we could have sold others," Communications Minister Gregor Pokhpatyan told a news conference. Earlier the government announced that OTE had won the tender for a controlling stake in Armenia's telecoms utility.
The deal, in which OTE will get a 90 percent stake in the mostly state-owned company and leave the rest in Armenian state hands, was worth around $500 million, a government statement said.
Of that money, OTE would pay $142.7 million up front and agreed to invest $300 million in Armenia's communications network over 10 years, including $200 million in the first five years, the statement said.
Some money from the proceeds of the sale would go towards covering Armenian budget deficits.
The Armenian government now has a 51 percent stake in ArmenTel, which handles international communications for the former Soviet republic of 3.5 million people.
Forty-nine percent of ArmenTel is owned by Transworld Telecommunications Inc of the United States. Transworld stands to get a little over $62 million from the deal, Avanesyan said.
The ArmenTel sale was the first of several high-profile privatisations of large Armenian enterprises through international tenders. Others open or under negotiation with bidders are the Lyus lightbulb factory and the Yerevan cognac plant.
OTE heads a consortium which is expected to include the Cyprus-based Leventis group and the European Bank for Reconstruction and Development (EBRD).
Armenian government sources have said Metromedia of the United States also competed in the ArmenTel tender, which was announced earlier this year. Avanesyan said OTE would obtain an exclusive 15-year licence on internal telephone lines, international lines and paging systems in Armenia. Under the agreement, OTE would agree to hold regular residential phone fees to 600 drams ($1.20) per month until 1999, when they would be raised to 850 drams.
Rates for commercial enterprises would be held to about $5 monthly until 1999, said Avanesyan.
By George Georgiopoulos
ATHENS, Dec 9 (Reuters) - Greece's partly privatised state telecoms company OTE said on Tuesday it was acquiring 90 percent of Armenia's Armentel for $142.5 million, part of its goal to expand abroad. The Armenian Republic will retain the remaining 10 percent. ``The acquisition of a controlling interest in Armentel represents part of OTE's strategy for the Black Sea region,'' board chairman Dimitris Papoulias said in a news release.
``We believe that this region offers outstanding opportunities for the application of OTE's operating expertise to generate attractive investment returns.''
With the largest capitalisation on the Athens bourse, around $9.5 billion, OTE operates 5.5 million lines and has 23,800 employees.
Its new acquisition follows OTE's recent acquisition of a 20 percent stake in Serbia's Telecom Srbija. OTE has also been eyeing a 40 percent stake in Moldova Telecoms, bidding against a French-Danish consortium.
Completion of the Armentel purchase was expected by January. The European Bank for Reconstruction and Development (EBRD) has indicated readiness to take a stake in Armentel and make a loan to it next year.
``We are going to take it to our board, most likely in February, and then we would be looking to invest in equity and probably make a loan to the company,'' EBRD principal banker Andy Scott told Reuters.
He said the EBRD was still negotiating on the size of the stake in Armentel to be acquired from OTE and it could turn out to be around 10 percent. Armentel will be licensed exclusively to provide a wide variety of fixed and mobile telecommunications services for a period of 15 years.
It will also be licensed to provide value-added services on a non-exclusive basis, OTE said.
The sale was expected to lead to a significant overhaul of the Armenian telecoms sector since the licence calls for the installation of a certain number of digital lines, increased penetration and a formula to raise local tariffs and cut rates on international calls.
Armenia, a former Soviet republic with a population of 3.5 million, has 585,000 telephone lines currently in service -- 74 lines per Armentel employee.
The ratio is expected to reach around 150 by the year 2008, with digitalisation rising to 47 percent from 3.0 percent currently. Armentel started to offer GSM mobile telephone service in 1997.
``Armentel's revenues are projected at $60 million next year with an EBITDA margin of around 50 percent,'' OTE said.
Armentel does not charge for local calls now as it lacks the technology to metre them.
``From Armenia's perspective the deal makes sense in that the licence requires the installation of digital lines and expanded penetration, so they will get a better quality network and a lot of investment,'' Scott said.
Likewise, Greece's Leventis investment holding company has agreed in principle to participate in Armentel and acquire up to 10 percent of OTE's holding.
© Reuters
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