LARGER THAN EXPECTED BIDS FOR TUNISIA'S LARGEST

C O N F I D E N T I A L TUNIS 000629

SIPDIS

SIPDIS

STATE FOR EB/CIP (SHIPMAN) AND NEA/MAG (LAWRENCE)
USDOC FOR ITA/MAC/ANESA (ROTH)
STATE PLEASE PASS TO USTR (BELL)

E.O. 12958: DECL: 03/16/2016
TAGS: ECPS EINV ECON TS
SUBJECT: LARGER THAN EXPECTED BIDS FOR TUNISIA'S LARGEST
PRIVATIZATION EVER - TUNISIE TELECOM

REF: A. 05 TUNIS 2234

B. 04 TUNIS 2237

C. 03 TUNIS 1996

Classified By: Ambassador William J. Hudson; Reasons 1.4 (b),(d)


1. (SBU) The larger-than-expected bids (ranging from USD 1.76
to 1.92 billion) for the partial-privatization of Tunisia's
telecommunications giant - Tunisie Telecom - continues to be
welcome economic news. Local media announced March 15 that
the initial slate of six bidders on Tunisie Telecom had been
narrowed to three final contenders: France Telecom (FT),
Vivendi, and TeCom (UAE),with bids of USD 2.5, 2.4, and 2.3
billion, respectively. On March 16, however, Reuters
reported a France Telecom spokesperson's denial of France
Telecom's offer of USD 2.5 billion, saying "The figure
mentioned is inexact. We offered significantly less."
Industry insiders have reported to post that the initial
media-reported figures were likely not converted from
Tunisian dinars to dollars (current exchange rate of 1.3TD to
1USD),hence the initial overstated figures.


2. (C) Nonetheless, Tunisiana CEO Scott Geggenheimer told
Econoff that the range of bids submitted "supports the
reliability of a good valuation (for Tunisie Telecom) and
indicates the company has strengths." Geggenheimer cautioned
that without viewing financial documents he could not render
an opinion on Tunisie Telecom's valuation and that "there is
a lot of excess liquidity in the region" due to heightened
world energy prices, but "the fact that three separate
bidders are in general agreement is noteworthy." (Tunisiana
is Tunisia's only private mobile services provider and rival
to Tunisie Telecom; Tunisie Telecom holds monopoly power for
all other telecom services in Tunisia.)


3. (SBU) Initial bids were submitted on March 9 and included
South Africa's MTN, Etisalet (UAE),and a joint Telecom
Italia/Oger bid (Italy/Saudi Arabia). These latter three are
no longer under final consideration. Under the terms of the
privatization, top bidders within 10 percent of other top
bids are allowed a second opportunity to resubmit their bids.
Private attorney and Tunisiana board member, Noureddine
Ferchiou, told DCM March 16 that Tunisie Telecom is looking
for a "strategic partner," but he insists that financial
offers will be the sole criterion for decision. Ferchiou
also told DCM that Vivendi sources had expressed surprise
that Vivendi was still in the running, expecting to have been
outbid. France Telecom, Vivendi, and TeCom are expected to
submit revised bids in the next few weeks.


4. (C) Industry watchers are additioanlly speculating as to
whether or not compromises over key management seats will
also now factor into the eventual Tunisie Telecom award.
Geggenheimer noted that industry rumors are currently
centering on bidders' insistence on, at a minimum, a "co-CEO
position", in addition to likely requirements for Chief
Financial Officer and Commercial Officer positions. Some
media have reported that the GOT's award would be based
solely upon the amount of the bid. Geggenheimer noted that
even after a winner is announced there will be heightened
negotiations over management issues prior to final deal
signing. (Ref A reported early speculation on management
positions that the GOT would likely insist on retaining.
Other reftels provide additional Tunisie Telecom background.)

Comment
--------------

5. (C) Tunisie Telecom's 35 percent privatization is a
continuation of the GOT's commitment to reduce the role of
state planning in the economy and to draw in more foreign
investment and management. This privatization, which had
been expected to draw bids in the neighborhood of USD 1.5 to
1.6 billion is even more welcome news to the GOT and a sign
that the Tunisian investment landscape is, at least in the
telecom field, increasingly attractive to foreign investment,
given that this sale will surpass all previous Tunisian
privatizations combined. While U.S. business interests have
not entered this contest, it is not surprising to see French
interests actively contending (and likely) to consolidate
their dominant position in Maghreb telecom arena.

HUDSON