Telecoms showcase - larger companies

Benchmark transactions - investing in larger companies

The Bank has invested in many major companies in the region. Such projects can have a high demonstration effect and a significant impact on the market in any particular country.

Benchmark transactions include Telekomunikacja Polska in Poland and TIW in Czech Republic.

Creating a buzz in Russia’s Silicon Valley

One company that knows there is far more to the Russian economy than natural resources wealth is JSC Concern Sitronics, in which the EBRD acquired a 3.67 per cent stake in September 2006.

Sitronics, whose production facilities are in the city of Zelenograd near Moscow – the area known as Russia’s Silicon Valley – is a conglomerate of high-tech companies making everything from microchips to phone equipment and software.

So successful has Sitronics been at building up a coherent business in a fragmented global market that it notched up €725 million of consolidated sales in 2005 and announced plans to go public in 2007 with the first initial public offering (IPO) by a Russian high-tech company.

The EBRD’s €63 million investment in new Sitronics shares, provided in advance of the IPO, is helping to upgrade technology standards in Sitronics’ microelectronics branch, which already boasts the most advanced mass production facilities in Russia for microchips and integrated circuits.

The Bank’s investment will help to show that Russian knowledge-based and high-tech companies have the potential to become competitive and are committed to improving their business practices.

Sitronics is part of the Sistema group, the largest Russian financial-industrial group outside the natural resources sector. Sistema is a blue-chip company whose shares are publicly traded on Moscow and London stock exchanges.

Sitronics was rebranded at the beginning of 2006. Before that it was known as JSC Kontsern Nauchny Tsentre. The group employs 10,000 professionals and incorporates companies in the Czech Republic, Greece, Romania, Russia and Ukraine.

Sitronics sees the rebranding and the IPO as steps towards becoming the largest high-tech company in central and eastern Europe. It aims to rebalance its businesses, becoming less dependent on telecommunications, upgrading technology, making judicious acquisitions, and enhancing an already good record in corporate governance. It benefits not only from high-class products but also from the region’s highly skilled but inexpensive labour force and its extensive market knowledge and customer base.

Sistema has injected about €152 million of new equity into Sitronics to finance development and is committed to enhancing the quality of corporate governance in its businesses. The revival of Zelenograd as a scientific and industrial centre after the economic crisis of the early 1990s is largely due to Sistema.

“We value the EBRD as a shareholder. Its presence highlights our positioning as a European and not just a regional company,” said Sitronics President Evgeny Utkin. “It underlines our successful performance as a business and the fact that our treatment of minority shareholders meets international standards.”

Telekomunikacja Polska, Poland

The EBRD invested US$ 75.5 million in the IPO of Telekomunikacja Polska S.A. (TPSA). The EBRD's investment represents 8.1 per cent of the shares sold by the Polish Treasury in the IPO and 1.21 per cent of TPSA's share capital. The IPO of TPSA increased the liquidity and depth of the Polish equity capital market, nearly doubling the then market capitalisation of the Warsaw Stock Exchange. It is also expected to improve Poland's access to international financial markets and attract new sources of finance to the country, thereby increasing investments, in particular in the telecommunications sector, and accelerating economic development.

The EBRD will seek to be an active minority shareholder in TPSA and it intends to support the management's objective of transforming the company into a modern, privately run, customer-oriented and efficient telecommunications operator. The Polish Government is currently negotiating the sale of a further 35 per cent stake to France Telecom.

TIW, Czech Republic

The EBRD invested US$25 million in TIW Czech N.V., a third provider of GSM services in Czech Republic through its sole operating subsidiary Ceský Mobil.

TIW Czech is controlled by ClearWave N.V, a wholly owned subsidiary of Telesystem International Wireless Inc. (TIWI), the Canadian-based global wireless operator listed on the Toronto Stock Exchange and Nasdaq. The investment is part of a US$ 130 million capital increase made alongside existing shareholders. Proceeds will be used to finance the expansion and development of the company's GSM 900/1800 networks and further development of its operator in the Czech Republic.

The project will promote sustainable expansion of the telecommunications network and foster the emergence of innovative and advanced services crucial for the overall competitiveness of businesses in the region. In particular, the Bank's investment will help promote competition and stimulate customer choice in the Czech Republic by facilitating the entry of a new international mobile operator in the market.