July 2000

Bulgaria Update Memo

The following report outlines new developments in the past three months and the state of on-going developments.

1. Introduction

1.1. In the second quarter of 2000 the public attention was focused mainly on two telecommunications-related topics:

A) The on-going finalisation of Bulgaria’s biggest cash privatisation deal: the sale of a 51 percent stake of the national incumbent operator - the Bulgarian Telecommunications Company plc (BTC). Within the same deal the buyer is expected to get a license for a second GSM operator in Bulgaria.

In April the negotiations between the Bulgarian government and the potential buyers of BTC from the Greek/Dutch consortium OTE/KPN ended successfully. Now experts from both sides are working on the documents related to the sale contracts. The Government introduced for discussion its report on the privatisation of the BTC in the Parliamentary Economic, Budget and Legal Committees. According to Government officials, if the consortium is approved as a buyer, OTE and KPN probably will register two companies with different holdings: respectively 60-40 share ratio in the BTC and 40-60 in the second GSM operator.

B) The launch on June 1st of the first private national broadcast TV in Bulgaria.

The Balkan News Corporation, financed by Rupert Murdoch, was awarded a programming and telecommunications license on competitive basis several months ago. Experts’ opinion is that the launch of the first private television with national coverage marks the start of the real competition on the TV commercials market in the country. According to the study of Rating Bulgaria, cited by Bulgarian News Agency, the first private national TV channel entered the Bulgarian TV market in a climate of high media interest and public expectations.

1.2. Some new facts and figures for the recent development of the telecommunications market in the country:

• The number of customers of MobitTel’s - so far the only GSM operator, reached 287 000 and the number of RTC Mobikon’s subscribers – the operator of the NMT 450i cellular network, exceeded 180 000.
• In 1999 BTC marketed ISDN (Integrated Services Digital Network). During this year BTC has sold on the market respectively 1146 ISDN (2B+D) subscriber lines and 140 ISDN (30B+D) subscriber lines out of 7041 ISDN (2B+D) and 254 ISDN (30B+D) installed capacity in the network in total.
• The total revenue of BTC for 1999 amounts to 730.5 million DM – a 29.6 % increase since 1998. For the same period the net profit increase was 20.5 %. The total revenue for the first quarter of 2000 was 189.2 million-DM.

2. The regulatory background

In the first half of the year the State Telecommunications Commission (STC) submitted a number of licenses according to the new procedures of the Telecommunications law. These licenses were mainly for TV and radio broadcasting and for cable distribution networks for radio and TV signals.

In June the Bulgarian government accepted the proposal from the STC to issue an additional license for development and operation of a national television network. The necessary documents will be accepted till September 1st 2000. According to the STC’s Chairman, the license will probably be submitted to the competition’s winner in November.

After a Prime Minister’s order, a special commission was appointed for the evaluation and ranking of the received documents from eight competitions for the development and operation of regional public radio networks. The term is the end of October.

3. On-going regulatory developments

In mid-May the Bulgarian government approved a draft for a Law for amendments and modifications of the Telecommunications Law. The amendments proposed are connected with its applicability in practice, a more precise definition of the rights and the obligation of the licensed operators, the scope of universal service, State monopoly on some telecommunications activities and its grant to execution to the BTC, etc.(see more information at www.government.bg/bg/ ).

As it was stated by government officials, the conditions of the deal for the privatisation of the Bulgarian Telecommunications Company Plc and the above mentioned draft for modifications of the Telecommunications Law are under discussion with the relevant authorities from the European Commission.