Anti-Corruption Council official: Telekom acquisitions not transparent

NEWS 09.07.2020 16:57
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Source: N1

Anti-Corruption Council member Jelisaveta Vasilic wrote an op-ed piece for Danas daily saying that it’s not clear which regulations allow the Telekom Serbia to operate without any control by either the government or the public. We bring you the first part of Vasilic’s piece for Danas in entirety.

 “I will start this report with a time machine, going back to 2015 when the decision was taken not to sell the Telekom, a view shared by the Council.

That was when President Aleksandar vucic said on 11 December 2015 that the Telekom will improve its performance in four years and that the price of the domestic operator will be realistically higher by 1.2 billion Euro, the unofficially offered price at tender.

Brokers warned that the Telekom was excessively in debt on June 26, 2020 and that the debt is lowering Telekom’s profits.

This report is an attempt to see what Telekom’s problems are, how Telekom can be brought to legal operation, without corruption and without making a gift of public property to anyone.

The holders of public property are the Republic of Serbia, autonomous provinces and local authorities.

By giving public property to others to use, the holders of public property do not lose their ownership rights, it remains state-owned which means the ownership of all citizens who have the right to be informed about whether the public property is being managed properly.

Our state set up Telekom to use and manage telecommunication networks as an institution which has been given the use of the telecommunications network which means that Telekom is under obligation to do what is characteristic for good management to maintain and protect that property within its sectors of land line and mobile telephony; the Internet and multimedia; operate in line with the law to the benefit of the citizens, state and shareholders, achieve financial gain which is customary with companies that have special privileged ad monopoly importance; buy or sell public property through contracts, transparently and in line with market conditions and market prices.

Telekom claims that it is not public-owned and that the law on public property does not apply to it and in that way Telekom is trying to avoid implementation of the law which regulates certain control of the holders of public property.

Under Article 86 of the Constitution, our state recognizes three forms of ownership and they are private, cooperative and public property. Public property is state property which includes natural resources and all other goods of general interest and in general use under article 87 of the Constitution. Under our constitution, there are no other forms of ownership and it isn’t clear which Constitution and law can be used to claim that Telekom is not public-owned and is not subject to control as public property.

The article of the constitution in regard to public property is used as the basis for the law on public companies, law on public property, law on DRI (State Auditing Institution) and other laws which regulate the control of and use of public property.

Article 3 of the law on public companies states that public companies are companies which perform activities of general interest but article 2 of that law defines activities of general interest and those activities include electronic communication.

Article 3 of the law on public property states that resources of general interest are public property, all networks which means all companies operating with public networks including public-owned telecommunication networks.

That also stems from article 11 of that law which states that networks are resources of general interest which are used to in the economic activity of providing services by companies which were set up by the state to perform those activities to the benefit of the state and all its citizens.

Telekom was set up by the state or the PTT (post and telephone company) with a state capital stake of 78% (58% state and 20% of state capital in the form of Telekom shares) and just 22% for small shareholders which means private capital.

It’s not clear what regulation is the basis for Telekom to feel that it can use and manage some unnamed and unknown property under the Constitution and that it can operate without any control by the state or citizens.

Telekom is state, public owned and it falls under the law on public property whose implementation Telekom is persistently avoidin and preventing control by the DRI under which has the power to control state capital as state companies and their transactions such as the acquisition of Telekom.

In 2018, Telekom began speedily gathering property through acquisitions, the purchase of other companies.

The question that is always raised in acquisitions is whether the purchase of operators by Telekom is done transparently: are the acquisitions in line with the procedures defined by the law on companies, law on public property, law on public procurement; did the competent ministries check the acquisitions; did the government decide on the acquisition; how was the price for the acquisition defined; was that price defined in a public transparent procedure or was it agreed in direct negotiation; who controlled and reviewed the acquisition and finally why was the DRI prevented from controlling the justification of the acquisition, that is what economic effect the purchase of the operator the purchase had on the operation and capital of Telekom.

The DRI report titled Efficiency of Acquisition Control by Competent Bodies number :400-1109/2019-06/25 of 25 November, 2019 shows that the DRI reviewed the justification of business operation and efficiency of acquisition control in state companies – the JP (public-owned company) EPS (power company), JP Srbijagas and Telekom Serbia a.d.

Those three companies had the highest value of acquisitions but the Telekom had acquisitions worth 94,511,215 (in thousands of Dinars) in 2018 which, compared to 2017 is a rise in investments of 48 percent which is the highest acquisition in the public companies which were controlled.

The goal of the review was to determine the extent to which legality and institutional frameworks secured efficient control in those companies.

The DRI concluded that it is almost impossible to conduct a review of state property because the state does not have a registry of comprehensive records of state companies nor does it have records of state capital in those companies which makes it hard to determine if the acquisitions were justified.

Control of the acquisitions are regulated by different laws, primarily the law on ministries, law on companies, law on privatization and law on protecting competition.

Under the law on companies, the decision to alter the capital of a company is taken by the owner – the shareholder assembly which includes all shareholders.

The DRI report shows that no such decision was taken by the shareholder assembly.

According to statements by the chairman of the Oversight Board which were handed to the DRI during its control, the Oversight Board informed the assembly about the acquisition when it discussed the operations report for the period between May 2018 and May 2019.

Under article 4 of the law on public companies, the decision to alter capital is taken by the Oversight Board but the decision becomes legal only after it gets government approval.

The DRI report does not show that a legally valid decision on acquisitions waas taken because the required approval is not there.

According to the DRI report, no control was undertaken by the Ministry of the Economy, Trade, Tourism and Telecommunications Ministry, government or Public Sector Economy Board as a standing government body which had to have been done considering the majority state capital.

The DRI investigated whether the Ministry of the Economy (MP) controlled the operation of Telekom in regard to acquisition control and was told that the ministry has no jurisdiction over the operation of the Telekom except to draft documents to appoint management bodies.

The DRI investigated whether the Trade, Tourism and Telecommunications Ministry (MTT) controlled Telekom operations and learned that that ministry will get the power to establish communication with all operators only once the Law on electronic communications is adopted but that to date only verbal communication has been maintained and has not been documented because the regulations governing the Telekom do not include an obligation to keep provide information in writing.

Accordingly, the MTT did not conduct any control or oversight on the Telekom acquisitions.

The DRI investigated whether the Public Sector Economy Board looked into the Telekom acquisitions and received a report from the General Secretariat of May 27, 2019 saying that the government had not appointed the members of that Board which means that it does not exit and did not look into any acquisition.

Therefore, the investments into acquisitions was completed without a shareholder decision, with no control oversight or decision by ministries, the government and Public Sector Economy Board even though funds totaling 38.29 billion Dinars were used which is the value fo the acquisitions by Telekom which were paid for from public property and ended up in private hands.

The Telekom Oversight Board chairman said commenting the fact that there are no written records that the communication with the DRI about the acquisitions was verbal which is equal to written and that he was not asked for any documents about the meetings because it was verbal communication since the issues were sensitive and topics specific with written communication rarely kept so that it remains unknown who took the decisions on acquisitions, who controlled and oversaw the procedure, who assessed their justification which all indicates that this was illegal and also of possible corruption.

After that statement we should determine what Telekom and the authorities are hiding from the public and why the acquisition process was not transparent and not controlled and the sensitive nature and specific character which was the reason why no written records were kept.