A fast-changing digital world has proved challenging for telecommunications companies across the Western Balkans, but few have fared as badly as Kosovo’s state-owned Telecom, where market changes have conspired with chronic mismanagement and stiff competition to bring the firm to the brink.
Heavily indebted and over-staffed, Kosovo’s largest telecommunications provider, PTK, has gone from the young country’s most profitable firm to a loss-maker since 2015.
It took a further step towards potential bankruptcy this week when Z Mobile, a private provider, called in a debt of some 25 million euros through private enforcement, giving Telecom a week to pay up or generate the money by selling assets.
“Telecom… in its current state has minimal chances of making a transaction of such value,” said CEO Bedri Istrefi, vowing to fight the move.
Kosovo’s government wants to put Telecom up for sale again, its third attempt in a decade, while Telekom Slovenije also announced this month that it plans to sell Kosovo’s second mobile provider, IPKO – heralding a major shake-up of Kosovo’s telecommunications market.
Workers are already threatening to strike.
“The attempt to privatise Telecom is only to cover up the failure of the institutions in managing Telecom and the crimes that have occurred there over the years,” Lahim Balaj, head of the Telecom Trade Union, told BIRN.
Illustration. Photo: Pixabay/albertoadan
Fateful contract
Since 2015, PTK has posted losses of 7.9 million euros, 50.9 million euros, 13.9 million euros and, last year, 15.5 million euros, according a report of National Audit Office, which said the figures may not represent the “true” picture.
The share capital has plummeted from 59.4 million euros to 25.5 million.
Some observers trace the company’s decline to a 2009 contract with privately-owned Z Mobile, a mobile virtual network operator that used Telecom’s network and technology but later complained that the firm did not provide enough SIM cards or offer Z Mobile 3G and 4G services, in breach of their deal.
In 2016, an arbitration court in London ordered Telecom to pay a multi-million-euro penalty and 5,000 euros for every day it delayed payment.
The fine threatened to bankrupt Telecom.
Speaking in May before a parliamentary commission created in March to probe the situation at Telecom, Kreshnik Gashi, head of the Regulatory Authority of Electronic and Postal Communications, said the company faced “many challenges and is endangered by other virtual operators.”
Others were more damning.
“Telecom started to downgrade once they signed the agreement with Z Mobile,” expert Naim Maloku told the commission last month. Critics of the deal say it effectively allowed Z Mobile to compete with Telecom’s mobile arm, Vala, using Telecom’s own system.
Armend Zemaj, a lawmaker from the opposition Democratic League of Kosovo and a member of the parliamentary commission, told BIRN:
“The Commission has shed light on many negative things that have happened in PTK; it has shown that this asset has been used for the interests of specific groups, clans and individuals whose primary goal was personal benefit.”
Hekuran Murati, an economic expert, also blamed “criminal management” that, he said, had “damaged the enterprise through over-employment in violation of all rules and procedures, through criminal contracts aimed primarily at stealing the capital of the enterprise.”
Third time lucky
According to a document seen by BIRN, Telecom hired 234 new employees between February 2018 and February 2019. The company has justified the outlay with the need to keep pace with technological developments. The National Audit Office, however, said that in 2018 alone, 178 people were given jobs without a public recruitment process.
In December 2017, Kosovo’s Special Prosecution issued an indictment against three former senior Telecom officials.
Former executives Agron Mustafa and Ejup Qerimi and Rexhe Gjonbalaj, the former head of the Board of Directors, are accused of violating the agreement with Z Mobile.
Gjonbalaj, former Telecom chief executive Shyqyri Haxha and three others were acquitted in 2013 on charges that they entered into harmful contracts, falsified documents and abused their positions.
The same year, the government cancelled the sale of Telecom to Germany’s ACP Axos Capital Gmbh and U.S.-based investor Najafi after parliament rejected the 277 million euro deal.
On June 26, Telecom’s Board of Directors threatened to terminate the contract with Z Mobile.
Bedri Istrefi, the current head of Telecom, said he hoped to reach an agreement with Z Mobile on a way forward that would avoid any sanctions.
“Otherwise, we will have 2500 workers on the streets,” Istrefi told BIRN, in May.
Lulzim Rafuna, an adviser to Finance Minister Bedri Hamza, told BIRN that the government is considering a request from Telecom to guarantee a possible loan to pay the debt to Z Mobile.
Prime Minister Ramush Haradinaj, however, said in June that the government was unable to “keep Telecom alive with money, because it doesn’t have any.”
The government said in October 2018 that it planned to privatise Telecom within two years, the third attempt in a decade. In May, Economic Development Minister Valdrin Lluka advocated selling 51 per cent, with the state retaining the rest.
Balaj, the union leader, said: “If the government plans to privatise then the current workers should have secure jobs until they retire.”
