In January 2004, an agreement was signed on the privatisation of the Bulgarian Telecommunication Company (BTC). The new owner plans to cut the company's 25,000-strong workforce by at least 20% over two years, leading to protests from trade unions.
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In January 2004, an agreement was signed on the privatisation of the Bulgarian Telecommunication Company (BTC). The new owner plans to cut the company's 25,000-strong workforce by at least 20% over two years, leading to protests from trade unions.
The privatisation procedure for the state-owned Bulgarian Telecommunication Company (BTC), which had dragged on for several years, was finalised in late January 2004. Following various decisions by the Privatisation Agency and several court cases, the selected buyer was the Viva Ventures company, backed by the American equity firm, Advent. According to the privatisation agreement, within three years Advent will become the owner of 100% of the stock of Viva Ventures.
The deal sets a price of EUR 230 million for a 65% stake in BTC. Furthermore, during the next five years. the buyer will be obliged to invest EUR 400 million in BTC, plus the option of a further EUR 300 million. One of the most disputed issues during the long-running privatisation procedure was the price, and even now experts’ opinions conflict. Their conclusions vary widely, from the view that this is the biggest privatisation private equity deal in eastern Europe, to the opinion that it is a most unprofitable deal for Bulgaria, since the buyer will collect the company’s dividends for 2002 and 2003 (amounting to about EUR 180 million) and the obligation to invest EUR 400 million will be met using the funds of BTC and not outside funds or funds belonging to the buyer.
Mainly for this latter reason, both the right- and left-wing opposition parties in parliament do not support the deal, since they are of the opinion that it is not beneficial for Bulgaria. However, the US Embassy in Bulgaria assessed the BTC deal and the agreement between Advent and the government as an encouraging sign for the overall investment climate in the country.
One of the touchiest issues during the negotiations, resulting in workforce unrest at BTC, is the forthcoming restructuring of the company after privatisation, which will result in significant personnel cuts. Around 25,000 employees currently work at BTC, and the privatisation agreement foresees a workforce reduction of 4,000, or about 20%, over the two-years period up until 2006. Presently neither the buyer nor the government have a clear view on the size of the BTC workforce after 2006. Senior representatives of Viva Ventures have made cautious statements that all future decisions regarding personnel will depend on how the business is run. Different estimates suggest that it is realistic to expect the loss of about 7,000-8,000 jobs over the coming three to four years.
The prospective job losses brought a sharp reaction from telecommunications workers' trade unions, which held a number of regional and national protests. Bearing in mind that these are among the best organised sectoral trade union federations in Bulgaria, it seems likely that tension will continue. To a large extent influenced by the unions' pressure, the buyer of BTC has made a commitment to develop a special social programme worth around EUR 45 million, to be invested in programmes for alternative employment, retraining of redundant personnel, and payments for employees agreeing to voluntary departure. However, the trade unions have expressed anxiety that there has been no final agreement on the programme and no guarantees that it will be implemented.
Eurofound recommends citing this publication in the following way.
Eurofound (2004), Job losses to follow BTC privatisation, article.
