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Bulgaria - Market Intelligence Report
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Market Intelligence Reports provide an invaluable mix of vital market data and background information, including telecoms regulation. The adoption of the new Telecommunications Act 2003 in early-October 2003 (amended slightly in 2005) provided a more workable foundation for the liberalisation of Bulgaria's telecommunications sector. Not only did the new Act allow for the long-awaited privatisation of incumbent operator Bulgarian Telecommunications Company (BTC) to proceed, but it also more clearly defined the incumbent's role and obligations in the competitive environment and finally allowed for the licensing of alternative fixed-network operators to compete with BTC. It further installed safeguards to protect incumbent and new entrants alike from abuses of significant market power (SMP) and to insulate new entrants from the high costs of establishing networks or interconnection arrangements. However, with Bulgaria having joined the European Union (EU) at the start of 2007, a new Electronic Communications Framework was drafted in 2006 to implement the broader EU Communications regime. This new framework had not been enacted into law at the time of writing. The privatisation of BTC has been a long-running affair, dogged by political and economic upheaval as well as the dictates of the parties that expressed an interest in buying into the company. Initially, a consortium of Royal KPN and Greece's OTE was selected to buy 51% of BTC; however, the sale was abandoned in August 2000 after more than a year of negotiations that foundered on BTC's lack of a digital cellular licence. In September 2000, the government decided to press ahead with the licensing of a second GSM operator as soon as possible. The tender documents were published in November and the auction took place in December. OTE bid US$135 million for the licence, which was officially granted to its local subsidiary Cosmo Bulgaria Mobile (which trades as GloBul) in July 2001. Services were launched under the GloBul brand in September that year. In May 2001, BTC had officially requested that it be awarded a GSM licence. Although the regulator recommended that BTC be given a 15-year GSM licence from January 1, 2002 for a fee of US$42 million and an annual charge of Lev100,000, the change of government in June 2001 derailed this proposal. The government eventually capitulated and a sale agreement for BTC, including an all-new GSM 900/1800 licence, was signed in early-2004. Despite further resistance from the CRC and the other mobile operators, in June 2004, BTC was granted a 20-year GSM licence and the sale of 65% of BTC, to Austria-based Viva Ventures, was completed. Viva paid a total of €280 million for its stake in BTC, though this did not include the €28 million GSM licence fee. The privatisation of BTC was finally completed in January 2005, when the remaining 35% of the company's stock was floated on the Sofia Stock Exchange. The 2.87 million shares were floated at a minimum price of Lev100, the approximate price paid by Viva the previous year. The government retained a 'golden share' in BTC, entitling it to veto any strategic decisions concerning the company's future, such as a takeover. This golden share needed exercising sooner than anticipated, however, as December 2005 saw Advent agree to sell Viva Ventures to UK-based private equity company Novator. Although Novator was prevented from consummating the deal before July 2008, the company's backers viewed rising interest in the Bulgarian market as an ideal opportunity to capitalise on their investment. Consequently, it was agreed that AIG Global Investment Group would buy Novator's 65% stake in BTC as well as a further 25% held by companies associated with Novator. The new deal closed in August 2007 and AIG said it would pursue the purchase of the remaining 10% of BTC as soon as possible. The deal is now being scrutinised by Bulgaria's Financial Supervision Commission. A tender for three 20-year 3G UMTS mobile licences was launched in January 2005 and attracted interest from eight companies. In the end, the licences went to the three existing mobile operators: MobilTel bid Lev78 million for the Class A licence (with greater capacity) while BTC and GloBul each agreed to pay Lev42 million for Class B licences. In October 2005, the CRC completed the auction of two Class A and three Class B broadband wireless licences. The two Class A licences were awarded to new entrants Trans Telecom and Cablenet (Max Telecom) for approximately €2.58 million each. The licences are for a frequency resource of 2 x 21MHz in the 3.5GHz range. The Class B licences were awarded to Bulgarian Telecommunications Company (BTC), Nexcom Bulgaria, and Orbitel and are for a frequency resource of 2 x 10.5MHz in the 3.5GHz range. However, in December 2005, both BTC and Orbitel returned their 3.5GHz licences. One of the returned licences was subsequently awarded to mobile operator MobilTel and the other was eventually issued to new entrant Carrier BG. MobilTel has already used its licence to launch a WiMAX-based service.
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