Huge interest in "Telefonija" shares, NIN

27.09.07 14:07  -  Press releases, Interview

An interview: Branimir Bošković, Chief Executive Officer of A.D. „Telefonija

Since its foundation, from 1954 until today, "Telefonija" passed complex development path, pursuing latest global achievements in the area of telecommunication infrastructure, providing full package internet services, representing and maintenance support of world renowned manufacturers in telecommunication equipment and fiscal cash registers, as well as in other enterprises.

It succeeded to keep the pace with leading world companies in its own basic activity, owing this, in the first place, to numerous experienced engineers, among which thirty of them have international certificates and licenses.

Moving into its new home – modern business premises in Belgrade – Telefonija obtained, not only new development capacities but, also, more space for diverse and more efficient organization of its operating. These topics and other news are the subject of an interview with Telefonija CEO, Mr. Branimir Bošković.

In the course of current year, Telefonija was organized as Business system Telefonija AD, assuming, besides parent Telefonija company daughter companies, to be more precise - DOO (Ltd.) companies, owned by Telefonija with 100% capital: first daughter is Gastel company, purposed for distribution of natural gas on entire territory where Telefonija signed gasification contracts with municipalities and local communities and, second BeotelNet Internet Service Provider, the first and largest provider in Serbia. As a matter of fact, we detached BeotelNet in previous year and from the beginning of this year it operates as independent company.

Earlier Telefonija operated mostly in Belgrade while now it is highly represented in Novi Sad, as well as in entire Serbia, and even in Bosna and Hercegovina. Do you have separate daughter companies in Vojvodina and Bosna?
Daughter company Telefonija Brčko, is our company for operating on entire territory of Bosna and Hercegovina. Having Vojvodina in mind, in previous year, we bought local internet provider NS Point and turned to be a 100% owner of the company, which is our fourth daughter company. We wanted our development and progress to be faster and, this was possible to attain with buying the local internet provider – this is the way to expand our users' base faster and with more efficiency. So, Business system Telefonija, besides parent company, also, holds four daughter companies.

What is the core activity of Telefonija Company?
We detached the core business – telecommunications and IT technologies, since these were the main activities of Telefonija in all these years, so it was logical that it became parent company. Non-core business is the providing of internet services, operator activity at the moment and, in the future, providing of other telecommunication services, as well as gas distribution services. At the present, these include the construction of gas networks and, in the coming year it will be distribution of natural gas on entire territory where Telefonija performed construction works and sale connection fee. Our perspective is that, in the future, through strategic partnership and increase of operating volume, our daughter companies become engines of further development.

What are the operating results for the year of 2006, in comparision with the first nine months results of current year?
- Preceding year was very successful for us, with the increase in income of 35% and 40% in operating volume. Essential thing in first nine months of present year is that we continued up-going trend and that, if we look back in previous year, we achieved the same level of trade and earnings. Judging by the tendency of operating, in next three months we will not only achieve our very ambitious plan for 2007 but, exceed it extensively, especially by introducing new programs of gasification and installation of gas networks, as well as expanding internet services and maintenance.

Telefonija is attractive company. Are there potential investors, aiming to become shareholders of Telefonija?
- In regard to shareholding, concerning appearance on official listing of Belgrade Stock Exchange, in the beginning of the year Telefonija took measures, in order to fulfill all requirements of Belgrade Stock Exchange, so that our request is submitted in following month to competent commission. We expect, early in November, appearance on official listing of Belgrade Stock Exchange, which will surely contribute to further attractiveness of Telefonija to foreign and domestic investment funds, meaning introduction of these funds into ownership structure of Telefonija AD.

Is it now possible for investment funds to invest into Telefonija? What effects the new share distribution of your company produced?
Current price of shares on stock exchange, notwithstanding it is below 15 000 RSD, limits the majority of professional investors aiming to purchase our shares because, in practice, they can not purchase larger quantities of shares on Belgrade Stock Exchange. They approached us and required new distribution, so that we decided to issue 35 000 shares. If one looks ongoing demand and supply on Belgrade Stock Exchange, it can be seen that for 15 000 RSD virtually there is no larger volume of demand for our shares, which is hardly enough for foreign investment funds who purchase, in effect, minimum 3 000 to 5 000 share units and more.

Are you acquainted with latest investment trends and tendencies in the world?
- Three weeks ago I was in Istanbul on a major investment conference. In stock trade and shareholding Srbija was represented by three companies, including Telefonija. I had meetings with 24 foreign investment funds, including leaders in stock investment for entire South-eastern Europe. There is a huge interest for the shares of Telefonija. Investors see Telefonija as a future partner, a company worth of investments, firstly in sense of internet providing. However, they are interested, not only in telecommunication area but, gas and gas infrastructure as well. They all know that this area is very profitable in all countries which already introduced the process of deregulation in telecommunication and energetics.

Since gasification is relatively new area in operating of Telefonija, tell us - where are the locations of gas infrastructure and have you already signed contracts on performing the gas distribution services?
-It is a very important fact that, until now, Telefonija had signed five projects and five contracts for construction of gas networks, in the first place, on the territory of Subotica - in 12 local communities - then, in municipalities of Zvezdara, Obrenovac, Pančevo and Kovačica. We invested one million and half Euros in gasification of Subotica since the start of the year. Also, we intend to invest six and half million Euros obtained from new share distribution, for the most part, in gas networks, simply because we expect, very soon, in coming year, that invested assets pay back and, increase in selling volume. We hope to complete seven thousand households in two local communities in Subotica municipality by the end of this year. It is Bajmok, with already completed distributive network and Čantavir, where 40% of works is done. There will be seven thousand households and, the price of single connection fee is one thousand Euros.

What are the profit expectations of this enterprise?
- Only from two mentioned distributive networks, which will be completed by the end of current year, we expect seven million Euros turn over. It will, of course, affect the operating of Telefonija. Surely, we intend to direct 80% of fresh share distribution assets in completing of other distributive networks, already contracted and, planned to be completed in coming year and, to secure between 10 and 15 thousand connection fees on annual level. Knowing that the price of one connection fee is around 1 000 Euros, it is easy to calculate the effects in year to come – practically, we will double the turnover of Telefonija and core business anticipated amount is, with no doubts, between 15 and 20 million of Euros.

We expect overall effects from gasification process, between 10 and 15 million Euros on annual level, made by connection fees sales. It means that, if we don't sign any new contract, only from already agreed contracts we anticipate in next three or four years effects worth 45 to 50 million Euros, which will be joined to total profits of Telefonija Company. Besides, after construction distributive gas network, Telefonija as the owner intends to appear as a distributor, in view of meeting the criteria needed for acquisition of distributive license. In that case, Telefonija gets additional income from distributive margin on all territories where our company builds gas networks. We expect, aside from primary income, to obtain monthly income as well, from margin based on distribution and consumption of natural gas.

Telefonija is, in this respect, investor in gasification. Are there any plans to increase investment potential with possible new share distribution?
- Telefonija emerges as huge investor and, advantage of this appearance lies in a fact that, investment funds embarking into Telefonija lately, see their opportunities here. We are already aware of interest in new share distribution planned for the beginning of next year, in significantly higher volume than present issue. We received requests, by now, to distribute new share issue worth 15 million Euros in the beginning of next year, regarding that signed contracts with municipalities and local communities enable us to practically place these investment into construction of distributive networks and that within one year period we expect to achieve return of the assets, which could be further reinvested in new programs and new gas networks.

What is strategic policy of Telefonija in coming period?
- Our strategic policy leads just in the direction of constructing telecommunication and gas infrastructure, knowing that only ten-odd percent of Serbia is gasified, while surrounding countries have the level between 60 and 70%. It means that, we have big market in this area and, our big advantage is that, besides resources, we intended for building networks as a contractor, we could, as well, emerge as an investor, in which case we finance, install complete network and, after the construction, we perform the selling of connection fee and, consequently we return full investment. After that, we plan to be engaged in gas distribution on locations which were gasified by us. For this matter, we held numerous discussions, not only with investment funds but, also, with strategic partners in gas infrastructure area, who are as well interested in investing into particular regions, municipalities and local communities, where aside from gas infrastructure, water drainage system and sewage system are missing. It means that through one investment – one construction, several infrastructure systems are realized. Primarily it is a benefit for the population and, of course, for municipalities. It is very easy to find investors ready to place their money, concerning that all the projects are highly profitable and return money in short period.

Is Telefonija, being a joint-stock company, sharing profit-dividends to its shareholders and, to what extent?
- Telefonija had shared cash profits in all preceding years and, for the first time in 2006, instead of cash, our shareholders were provided with dividend shares which could also be sold at Belgrade Stock Exchange at market prices, which increased during the time and, to valuate their investments accordingly. Current and future policy of the company management, intended for proposal to Board of Directors and Shareholders Assembly, is that remaining retained profit and 2007 profit are to be shared through new share distribution, in such case actual shareholders having pre-emption right to acquisition of shares and, naturally, to actual five share units they would get one new unit, as a dividend for our shareholders. It is our desire to encourage the shareholders of Telefonija Company to further investments in Telefonija, given that we have big plans for building and placements of new projects. It is our interest that shareholders are satisfied and, that they make more money by investing in Telefonija Company.

You mentioned a new organization in Telefonija. Does it assume new managing of the company?
- We are introducing corporate governance, in collaboration with IFC (International Finance Corporation) and Socius; it is the branch of World Bank which significantly assisted us in initiating the high level of corporate governance, environmental protection and labor protection, by which Telefonija fulfills all conditions of European Union for high standards and high level of managing the joint stock companies, meaning that we are one step ahead in comparison to others.

NEW SHARE DISTRIBUTION
Due to the great interest of foreign and domestic investment funds, Shareholders Assembly approved the decision on new share distribution. The matter involved is 35 000 new shares, intended for issuing from October 2nd, 2007. Actual shareholders have pre-emptive purchase right, in period from October 2nd-22nd, 2007 and, after that period, all persons interested in attaining the status of Telefonija shareholder have the possibility to purchase shares of Telefonija at a price of 15 000 RSD per share, from October 23rd to November 12th, 2007. Actual shareholders have privileged price of 13 500 RSD per share, which is 10% less compared to six months average of the shares. This is our way of awarding our shareholders and, of enabling future shareholders, also, to become owners of our shares, at a price which stands for six months trading average on Belgrade Stock Exchange – said Mr. Branimir Bošković.

FLUCTUATION OF SHARE PRICES ON STOCK EXCHANGE
Generally, Belgrade Stock Exchange showed one negative trend in previous two-three months, in the period when many shares dropped. Telefonija held rather well in this period – the price of its shares dropped slower compared to others. It is recognized that Telefonija Company has big plans for building and placement of new projects, while investing in Telefonija Company gives an opportunity to make more money on long terms