Tuesday, June 10, 2008

Sweden - problems of privatisation

Stockholm is facing rebuke for telecoms sell-off

Sweden's government faces a potentially embarrassing report into the handling of its sale of a controlling stake in TeliaSonera, the telecoms company that is the subject of a $41bn takeover bid by France Telecom.

The government of Fredrik Reinfeldt, prime minister, is in the process of selling stakes in six companies by 2010, including Nordea, the banking group, SBAB, a mortgage lender, and TeliaSonera. It marks a break with Sweden's socialist past to allow the free market a greater role in the economy.

But the National Audit Office, the main government watchdog, is expected to admonish the government for an alleged lack of expert consultation ahead of the planned sale of its TeliaSonera stake; a conclusion that could call into question its ability to negotiate the best possible price.

France Telecom has offered the equivalent of $41bn in cash and shares for TeliaSonera, based on France Telecom's closing share price of €17.91 last night. The offer has been rejected by the government and the company as too low. Other bids are expected but have yet to emerge.

Any suggestion from the audit office that the government may not have done everything possible to ensure it gets the highest price for its TeliaSonera shares threatens to revive uncomfortable political memories in Sweden. In 2000, the then government sold a batch of shares in the company in an initial public offering at SKr85 each.

About 1m Swedes out of a population of 9m bought shares that crashed after the tech bubble burst, triggering criticism the government cashed in at the expense of the general public.

The government confirmed a report on the sale of TeliaSonera was being compiled by the audit office but added its "dialogue with the audit office is ongoing" and that it "has yet to see its conclusions".

In the longer term, bankers said the report could strengthen the government's resolve to demand a higher offer for its 37 per cent stake in TeliaSonera. The desire to avoid damaging political criticism would also make it easier for the government to walk away from the deal if it did not get an offer it liked.

Mats Odell, minister for financial markets, has made clear the government is under no budgetary pressure to sell its stake in TeliaSonera and is prepared to walk away if the price is too low.

Riksrevisionen, the National Audit Office, is an independent, state-financed body with a remit that includes making sure the Swedish state does necessary preparation and consultation before selling stakes in state-owned groups.

It published a highly critical report last year about the government's handling of all six of the state-owned companies it has put up for sale, but the latest report dealt specifically with TeliaSonera, said Göran Hyltander, a director at the audit office. No firm deadline had been set for publication but it was expected within weeks.

No comments: