PRIME Minister Simeon Saxe Coburg has suspended the privatisation of Bulgaria's tobacco giant, Bulgartabac Holding, until the deal on the Bulgarian Telecommunications Company (BTC) is finalised, the Mediapool news e-zine has reported.

Deputy Prime Minster and Economy Minister Lydia Shuleva said that Bulgartabac should be sold in parts, and that the deal should be carried out by the holding itself, not by the Privatisation Agency.

The Movement for Rights and Freedoms (MRF), the coalition partner of the ruling National Movement Simeon II (NMSII) is not willing to participate in any talks on Bulgartabac's privatisation procedure before the two court actions on the telecom deal are finalised.

The MRF is insisting that BTC should be sold to the second-ranked bidder, the Koc Holding-Turk Telekom tie-in, and is waiting for the last chance possible for rejection of Viva Ventures as buyer of the company.

On the other hand, one of the conditions for the granting of PAL2 loan by the World Bank is the privatisation of Bulgartabac.

According to Shuleva, a new strategy for the sale of the tobacco holding will be submitted in early October to the Government for approval, and immediately after that to Parliament, moves which she believes will fully satisfy the Bank.

A World Bank mission is expected in Bulgaria in mid-October to review the implementation of the country's commitments. The mission is expected to produce a report, which the bank directors will consider in February. Bulgaria has until June 2004, the close of the bank's financial year, to use the PAL2 loan, which means that there can be no delay on the project, Shuleva said.

According to an article in Banker weekly last week, the privatisation of Bulgartabac will be done in several stages.

First, Bulgartabac's subsidiaries abroad will be sold through tenders or liquidated. The eight indebted enterprises (including those in Isperih, Doulovo, Vidin, among others) will be sold afterwards, and their privatisation will be followed by that of Yuri Gagarin BT - the cigarette box and filter manufacturer in Plovdiv.

In the next stage, the holding's shares in factories in Blagoevgrad, Sofia, Plovdiv and Stara Zagora will be offered for sale through tender or on the stock exchange. Finally, the residual state-owned share in Bulgartabac Holding (that will by then own only the building and trademarks) will be put up for sale.

Pari daily reported last week that the tobacco factory in Pazardzhik could be closed, in terms of the new strategy for privatising Bulgartabac. The activities of the factories in Pazardzhik and Parvomay are initially envisaged to be transferred to the enterprise in Pleven. The enterprise's poor financial results are the reason for putting Pazardzhik BT on the black list. In the first half of this year, it posted a loss of 176 000 leva, compared to a 234 000 leva profit for 2002. Parvomay BT is a steady loss-maker: 77 000 leva in 2001 and 312 000 leva in 2002. The prospects for this year are even worse. In the first half of the year, the company incurred a 268 000 leva loss.

There are two options for these enterprises: liquidation or sale. The second, however, is not very likely since they are not major units of Bulgartabac's production cycle.

In March, the Government cancelled a 110 million euro deal with Deutsche Bank for the sale of Bulgartabac's tobacco processing facilities and its 22 cigarette production companies, labelling the deal unfavourable to Bulgaria.