24 May 2006

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Business Today

Off she goes

Governments have no business playing a commercial role in the telecoms sector that has developed into a highly competitive global market and within this context Maltacom’s privatisation last week is welcome news.
Privatisation should ensure that Maltacom will continue to flourish in its role as a telecommunications giant and this leader augurs that the Dubai investors will develop a comfortable relationship with the numerous private investors who have supported the company throughout these years.
The three year hiatus demanded by government during which the new investors would not be able to de-list the company, sell or acquire more shareholding, was an important element in the deal because it gave the market some stability. Over the next three years Tecom can realise the potential dividends that can be reaped from the Malta Stock Exchange leading it to a conscious decision to retain Maltacom’s listing here and abroad.
This leader hopes that Tecom Investments does live up to its commitment of being a strategic partner that adds value to the company. The deal signed with government speaks of a three year investment programme to the tune of Lm30 million but as yet it is unclear whether the commitment comes in the form of a new injection of capital or whether the money will simply be a re-investment of profits, something which the company has been doing for years.
What the Tecom investors told the press after last Friday’s annual general meeting – people care more about service than technology – is correct but it is also true that better service can only be achieved if investment in technology is ongoing.
And given Maltacom’s strategic role in the economy, an ongoing investment programme in technology is a necessity.
Coming at a price tag of Lm95 million, the deal matches undisclosed targets set internally by government. The obvious question, even if now futile to make, is whether government could have negotiated a higher price.
While not claiming any expertise in the valuation of telecom companies, this leader believes that government weakened its hand at the negotiating table by making the Maltacom sale an imperative to the reduction of the country’s debt, a requirement set out by the Maastricht criteria. The Dubai investors were obviously not oblivious to this fact. Government was not in a position to stop the sale on the pretext that the conditions were not right to privatise given next year’s deadline to come in line with the Maastricht criteria for euro adoption.
Also, government’s defence of the initial price per share offered by Tecom, which was below market value, led everyone to believe that government was less interested in negotiating a higher price for its shareholding.
Now that the deal is done it is useless crying over spilt milk but it seems that the lessons that were to be learnt from the privatisation of Mid Med Bank have only partially been learnt. Unfortunately, privatisation is still carried out under a mantle of secrecy that gives rise to speculation and political bickering.
As for the deal brokered for Maltacom employees, it is welcome that all jobs are secured for at least three years, avoiding a sudden shock to the labour market. The timing of the three year deadline raises some eyebrows, coming just after the next general election thus avoiding any political flac in the run up to the polls.
But with Maltacom now functioning fully in the private sector it is obvious that jobs cannot be guaranteed for life.
Maltacom employees now have to face the reality thousands of other workers face on a daily basis plying their trade in the private sector with no job-for-life guarantee.
One can only hope that Tecom would seek to offer re-training programmes over the next three years and come up with generous voluntary redundancy schemes to trim the workforce accordingly.
It’s been a very long and eventful journey for Maltacom. Born out of the former 100 per cent state-owned company, Telemalta, Maltacom is today a major player in the telecoms market and the economy. Off she goes, with a few regrets but with a lot of promise for its shareholders, its clients and the country at large.

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Editor: Kurt Sansone
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