25 January 2006

The Web
Business Today

Maltacom’s Arabian nights

Kurt Sansone

The sale of government’s 60 per cent stake in Maltacom has attracted particular interest from the Middle East, with two of the three companies that submitted their bids last week hailing from Saudi Arabia and Dubai.
When bidding for the 60 per cent stake came to a close on Wednesday 18, only three of the five initial interested bidders are reported to have submitted their offer. The three companies are OgerTelecom, Dubai Telecom and Cable & Wireless.
Telecom Slovenia and Icelandic equity investment company, Novator decided not to submit their bids despite having expressed an interest.
Maltacom’s privatisation has not attracted large European companies previously touted as possible strategic partners for the Maltese telecoms company. But Telecom Italia may still be involved in the bid submitted by Saudi Arabia’s OgerTelecom, which belongs to the family of the assassinated Lebanese prime minister Rafic Hariri.
Government would not confirm the number of bidders, saying that proceedings were currently at a “delicate stage.”
In a very cautious tone, a spokesperson for the investments ministry said information on the Maltacom privatisation will be published later on.
“At this delicate stage of the proceedings, it is advantageous for the success of the process that information on the Maltacom privatisation is published at a later stage at the appropriate time. The Ministry will be publishing a statement over the coming days,” the ministry spokesperson told Business Today.
Government will be evaluating the bids submitted and shortly decide on which company or companies it will start negotiations with. The whole process can be expected to take up to two months.

Cristina’s memo included different proposals on residential rents, commercial rents, agricultural rents, requisitions, property rented by Government from the private sector and government property itself. It also looked at possible incentives and disincentives to boost the rental market.
Following the presentation of Cristina’s memo, the government decided that a draft White Paper should be presented by the end of October 2005.
Cristina said this process was finalised in mid-November but the draft white paper was only discussed at cabinet level on 16 January 2006.
“A memo of this type needs several long and lengthy discussions, which began at the Cabinet meeting of January 16th,” Cristina told Business Today.
Although a draft white paper has been presented to the cabinet, the social and economic impact assessments are still to be finalised.
“The results of the 2005 Census, which will be out in a few weeks, should provide the necessary details,” added the Minister.
Following the publication of these results, Cristina will be reporting once again to the cabinet.
She also announced that a census on commercial property has also been commissioned by the ministry for competitiveness and communications.

Reaction to AD’s proposals
On Saturday AD’s spokesperson for economy and finance Edward Fenech proposed that except in cases of inheritance between spouses, the inheritance of leases should be abolished.
Speaking to Business Today Fenech also added that inheritance should also be allowed in cases involving people aged over 61 years.
In the case of legally sanctioned improvements made to rented property by tenants before their death, AD is proposing that the landlord be given an option to pay the tenant's heirs the equivalent of the improvements' value less five per cent depreciation for every year since they were made.
Alternatively, landlords could translate that same value as depreciated into an additional period rent in lieu.
But according to Minister Cristina AD “seems not to be aware of all the implications” of its proposals.
“While it is undoubtedly true that landlords should enjoy their rights to their property, the social and economic implications of any move cannot be ignored, even if Government were to take on the responsibility of easing the burdens on landlords,” the minister said.
Cristina considered it irresponsible to propose categorical reforms without having “a full and true picture of facts as they are.”
“It is easy to put a proposal down on paper as AD is doing. It is a very different kettle of fish when, as a Government, you must ensure that reform is carried out sensibly and with responsibility, which is what Government is doing.”
Speaking to Business Today Edward Fenech added that while AD has published its proposals, the government has still to make its proposals known to the public. He also added that nobody has conducted a social and economic impact study of sixty years of unjust rent laws on landlords.

Labour’s view
Asked for his reaction to AD’s proposals, MLP spokesperson for housing Stefan Bountempo would not state his party’s stand on the inheritance of rent leases. Insisting that it was the MLP which had started the process of rent reform by appointing a commission involving all stake holders in 1997, Bountempo reiterated his willingness to participate in discussions with the government to bring about a holistic reform of the rent market.
“I have pleaded with Minister Cristina to participate in all-party discussions on rent reform,” Bountempo told Business Today.
But the MLP spokesperson would not commit himself to any reform, simply saying that any reform should “be fair to landlords and tenants alike.”
The proposals put forward by AD last Saturday also call for the complete liberalisation of commercial leases involving non retail outlets. AD is making a distinction between commercial properties of a retail nature, like shops, and those of a non-retail nature like warehouses or stores.
"One has to distinguish between a high street shop and a store in the middle of nowhere,” AD spokesperson Edward Fenech told Business Today.
“While the first category includes properties which could include goodwill, like high street shops, the second category involved properties like warehouses and stores that carry no goodwill," spokesperson Edward Fenech told Business Today.
Where non-retail properties are concerned, AD is proposing the complete liberalisation of leases following a six-month transition period for tenants. The tenants would then have the option to extend the lease period for one year upon payment of fair rent for one year payable in advance. The landlord will then have the right to repossess the property.

GRTU’s reaction
GRTU Director General Vince Farrugia told Business Today that in the long term he agrees with the liberalisation of commercial leases of shops operating under the pre-1995 rent regime because they constitute unfair competition to retail outlets operating under the post-1995 regime.
Yet Farrugia insisted that politicians who have neglected this issue for the past decades cannot impose a sudden and drastic change which would have a catastrophic impact on retail outlets in village and town cores and the communities they serve.
Farrugia welcomed the fact that a survey to study the economic impact on shop owners has been conducted by the ministry for competitiveness and communications, following a meeting with Minister Dolores Cristina.
“If rents are liberalised with immediate effect, many small shops in the community will simply close down thus restricting the choice for their clients,” Farrugia warned.
But Farrugia expressed his willingness to sit down around a table to discuss with the government the necessary reforms but only after the results of the survey being conducted by the government are known.


Business Today is published weekly on Wednesdays.
Website is updated weekly on Thursdays
Copyright © MediaToday., Malta
Editor: Kurt Sansone
Business Today, MediaToday, Vjal ir-Rihan, San Gwann
Tel: (356) 2138 2741 | Fax: (356) 2138 5075 | E-mail