After years of seemingly peaceful coexistence, the telecommunications majors operating in Bulgaria started a fight. A1 Bulgaria and Yettel Bulgaria challenge before the competition authority the deal in which local pay-TV and Internet services provider Bulsatcom sold its base stations and its fixed network for 90 million euro to a company of the Netherlands-based telecoms and media services provider United Group, owner of Bulgarian telco Vivacom and Nova TV. The two telecommunications operators also challenged before the Commission on Protection of Competition (CPC) the purchase of Bulsatcom by Bulgarian-born businessman Spas Rusev at the end of 2022, claiming it could disrupt competition.
The main argument of the two telecoms is that the third major player - Vivacom - may gain too much control over the market with the indirect acquisition of Bulsatcom's infrastructure and the financing of the deal. Yettel said in a press release that the transaction will allow Vivacom to gain a monopoly position - with over 60% share in the television distribution market and with nearly 40% in the Internet access market. In response, Vivacom accused Yettel of aiming to harm its business. The dispute has now been referred to the CPC, which has not proved over the years that it can make its decisions quickly without political interference.
Two to three and a half
Last week, Yettel Bulgaria announced that they submitted to the CPC a request to prohibit the sale of Bulsatcom's infrastructure after United Group's unit Slovenia Broadband announced the transaction. The opinion confirms Yettel's concern that a series of acquisitions of economically and infrastructurally strong companies by a major player in the telecommunications market will lead to the creation of a dominant entity with more than 60% of the television distribution market and nearly 40% of the Internet access market, Yettel Bulgaria said.
A1 Bulgaria also told Capital Weekly that they have requested the CPC to look into the transaction. "We request the regulator to investigate the notified transaction and other actions of United Group regarding Bulsatcom, aimed at acquiring control over this company," A1 said.
"Given the publicly available information, in our opinion, this is an attempt by United Group to acquire direct control over the activities of Bulsatcom, without notifying the transactions to the CPC as required by law. Additionally, the notified transaction for the acquisition of separate assets of Bulsatcom also is part of the actions aimed at gaining control over this company. It is possible to strengthen the market positions of the participating enterprises to the detriment of competitors and consumers," added A1. Bulsatcom declined to comment on the requests lodged with the regulator that challenge the acquisition.
A 127 million euro loan
Bulgarian businessman Spas Rusev joined the shareholding structure of Bulsatcom in September 2022 through the Luxembourg-registered company Viva Corporate, which is owner of Sofia-based Viva Corporate Bulgaria. The change in the ownership structure was the result of the replacement of previous creditors of Bulsatcom - Blantyre Capital and Black Rock funds, the European Bank for Reconstruction and Development, and the Bulgarian Development Bank, by Viva Corporate. A new loan agreement was concluded on September 8 between the sole owner of Bulsatcom - London-based Bulsatcom Investment Limited, and GLAS Trust Corpоration Ltd, which represents the interests of the abovementioned four creditors. The loan has a maximum principal amount of 126.5 million euro, which is roughly the selling price.
At the end of last year, it became clear from a report to bondholders in United Group that the owner of Vivacom and Nova TV provided such a large loan to Viva Corporate with which to acquire Bulsatcom. In return, Vivacom will receive 148 base stations of Bulsatcom, valued at 3 million euro, as well as the optical network of the operator for 87 million euro. The idea was that the first ones would be used directly by Vivacom, and the network would be leased back to Bulsatcom. The remaining 37 million euro of the loan will be refinanced by commercial banks.
Commenting on the transaction, Spas Rusev told Capital Weekly that it was "financed with a combination of my own funds and loans from international financial institutions, there is no Bulgarian participation". Then the businessman also announced his intention to potentially sell assets of Bulsatcom, which are not core to the company. Shortly before the deal, Rusev resigned from Vivacom's supervisory board. He was a major shareholder in Vivacom and sold the company at a profit to United Group.
According to the annual report of the Communications Regulation Commission for 2021, Bulsatcom is the leader in the pay TV market with nearly 650,000 subscribers. Vivacom is in second position with 626,000 and A1 comes third with 525,000. In the fixed Internet service Vivacom leads with 701,000 subscribers, followed by A1 with 606,000 and Bulsatcom with 170,000.