The Cabinet yesterday gave the go-ahead for the government to sell its 60 per cent stake in Maltacom to Tecom Investments of Dubai, the company behind the SmartCity@Malta project, in a €220 million (Lm94.4 million or Lm1.55 per share) deal.
Investments Minister Austin Gatt announced during a press conference yesterday that Tecom has agreed to invest around Lm30 million in new state-of-the-art technology for Maltacom in the first three years.
Tecom has also agreed not to delist the company from the stock exchange, increase its shareholding or sell any of its shares before January 1, 2009. Nor during that period will it impose any redundancies on Maltacom's 1,500 or so employees.
Dr Gatt said any voluntary redundancies offered by Tecom will be on the same terms that exist at the moment and the Dubai company has expressed a willingness to extend the collective agreement with the General Workers' Union by a further 12 months. Tecom has also pledged to undertaken certain "social responsibilities" such as subsidies for the elderly and disabled, broadband services for voluntary organisations as well as programmes for students.
Negotiations between the government and Tecom were concluded last Friday. Senior officials from the Dubai company will be in Malta tomorrow to sign the agreement, which the minister intends to present to the Parliamentary Public Accounts Committee on Monday. Dr Gatt said: "We want to be in a position to compete in a market that is changing dramatically year after year and Tecom has the financial power to do so."
The minister defended the price of the sale, reiterating that Tecom's original bid of €213 million was described by the government's financial advisors, Lehman Brothers Europe, as being in line with market expectations.
When asked why the share prices had not reflected that, he said the local stock market was "not a market that pays attention to the fundamentals" - unlike potential investors.
He added there was also a price to pay for having a strategic partner, as he revealed that one potential bidder sought to shed 400 jobs if it successfully bid for the overstaffed Maltacom. "We told it not to bid," he said. Dr Gatt again denied that the SmartCity project was an influential factor in the Maltacom deal, though he said that Tecom had originally attempted to make a connection between the two.
"On their (Tecom's) part it may have had a bearing, but on our part it did not." However, there is no doubt that the telecoms company will play a vital role in Smart City which is due to open in two years' time.
The minister stressed that Tecom was chosen because unlike the other shortlisted bidder, Ararco from Saudi Arabia, it was a strategic partner.
"We did not just want a financial partner or someone who would strip Maltacom to its core and then sell it... we wanted someone who would make a long-term commitment and who has a track record. Tecom's profile satisfies that."
Tecom's reputation in the telecoms industry has grown rapidly in recent years. It has obtained the second telecoms licence in Dubai and controls the clusters at Dubai Internet City and Dubai Media City - the model for Smart City. Last month, it also made a successful bid of €1.89 billion for a 35 per cent stake in Tunisia's public phone operator, Tunisie Telecom, and it has also become a strategic partner in Interoute, owner and operator of Europe's most densely connected voice and data network.
The Maltacom privatisation process started in July, 2004, when the Privatisation Unit appointed Lehman Brothers to act as financial advisors. One year later an international call for non-binding offers was issued and in October of last year the government received five non-binding offers.
Two final binding offers, from Tecom and Ararco, were received in the final stage of the bidding process on January 16 before Tecom was awarded preferred bidder status last month.