TP Internet (TPI), part of the Telekomunikacja Polska (TP SA) group, which controls an 80 percent stake in bankrupt Wirtualna Polska (WP), is planning to change the company's current profile as an Internet portal (the country's number three) to that of a financial intermediary - much to the fury of the portals' minority shareholders, who've been engaged in a vicious battle with TPI that began long before the company entered bankruptcy in April of this year.
"I could say, 'Tomorrow I am selling shoes,' but could I actually implement this?" says Jacek Kawalec, former WP SA president and now head of Key7 Investments, a key minority shareholder, referring to TPI's recent plans.
"All the business we do is running the portal. Why should they switch strategies? WP can only succeed as a portal - and the trustee has a duty to continue WP as a portal so that it can pay its creditors."
And in a statement to the press, that trustee - Wojciech Reguła, the manager of WP SA, chosen by the court in the bankruptcy proceedings - agreed that TPI's move would be acting against the interests of the company.
But Marek Konarski, president of the management board at TP Internet, not surprisingly, has an entirely different perspective, claiming that the original bankruptcy ruling had given Kawalec and Maciej Grabski, the other big name among the minority shareholders, the opportunity to buy the portal for zł.6 million, and that "this can be done under the pretence of the selection of their offer by the creditors themselves, while more favorable offers may be thrown out."
"We know that there are still other, much better buyout proposals, but regardless of which offer is accepted, WP SA will no longer have the portal," says Konarski.
"Seeing that the fate of the wp.pl portal was sealed, TP Internet decided to change significantly the scope of the operation of the enterprise and cross out the running of the portal," he goes on to say, "which will be taken away from the company very shortly for nearly a nominal price, from the scope of its activities."
Konarski then describes the proposed changes as moving into "financial intermediation in the broad sense and counselling in respect of management and leadership of business activity," which he says would capitalize on the experience of WP SA's minority shareholders, "whose enterprises can serve as an example of such activity."
What arises almost resembles an argument over semantics, as Konarski differentiates WP SA from wp.pl, while Kawalec doesn't separate the two, since, after all, wp.pl is quite clearly the core activity of WP SA.
Konarski further attacks Kawalec, saying, "When we realized that all the minority shareholders want is to take as much money out of the firm as possible and that they did not care about the survival of WP SA or the fate of its employees, and when we figured that there was no business rationale in continued investment in WP SA, especially at the 'drip-feed' rate of financing that only ensured stopgap financing of the day-to-day operation of WP SA (which was what the minority shareholders wanted), we decided to terminate the investment."
Indeed, TPI was quite vocal earlier this month in expressing its doubts as to whether the portal could even survive the coming weeks.
But Kawalec, along with the minority shareholders, believes the portal is actually doing well, considering the circumstances, and strongly disagrees with TP Internet's recent harsh opinion of the portal's chances for survival.
"It's part of their plan," he says of TPI's negative appraisal. "They will create any hesitancy in the market that WP has problems - which makes it harder to sell to advertisers."
Kawalec contends that WP SA is paying its bills, paying its employees on time, and that revenues are growing rapidly. He also commends Reguła for doing a "very good job" of managing the company.
"We will break even this year," Kawalec asserts. "By the last quarter of this year, we'll be cash positive."
Kawalec explains that what has happened to the company is largely a PR issue, and that "the level of aggression coming from TPI is very high - I am astounded that the other side is so aggressive."
He further disclaims the idea that shareholder conflict in general has caused WP's problems.
"The talk of shareholder conflict makes me think of a guy kicking another man who is lying on the ground. Do you then say there is a conflict between them, or that one of them is an aggressor?"
Indeed, much of the controversy revolves around the circumstances that led to WP's bankruptcy. While Konarski accuses Kawalec of forcing WP into bankruptcy in the hopes of later making a cheap acquisition of the portal (from his letter to the editor in the July 5 issue of the Business Journal), Kawalec points to the files retrieved from the laptop of former WP president Marek Borzestowski, which outline five alternate strategies for WP, among them bankruptcy, 'squeeze-out,' a merger of TPI with WP, and a buyout of the minority stake. (Borzestowski, it should be noted, is filing suit for theft of the laptop and accuses them of tampering with the files.)
"The document is self-explanatory," says Kawalec. "I have nothing to add on what TPI may have been hoping to achieve."
He does suggest, however, that the strategies outlined in these files revolved around preventing the exercise of the put options held by minority shareholders, and that TPI thought bankruptcy the best way to do that. And as for being in some way responsible for the bankruptcy, Kawalec correctly points out that he had been suspended from the management board for three months leading up to the decision, and that the day WP filed for bankruptcy was in fact the last day of this suspension period.
But TPI's Konarski does not relent, saying, "The truth is that all they want is to line their pockets. This is why they are multiplying the legal aspects of the dispute, trying to manipulate the media and portray themselves as victims of a big corporation."
And as even the most casual observer might notice, the argument appears to go beyond mere technicalities and money matters.
"It's a personal war," says Magda Borowik, a telecoms analyst for IDC, a market research firm. "Private matters are [being] settled here," she says. And indeed the countless intricacies behind the shareholder agreements are extremely difficult to pin down, with both sides often telling vastly different stories.
A good example of this lies in the issue of the put options. While TPI's Konarski claims that minority shareholders' exercise of the 'early put option' in December 2003 cancels out the possibility of any later exercise of the option, Kawalec says that the early put option and the 'normal' put option do not exclude each other, saying, "If the transaction doesn't take place then the 'normal' put/call option can be exercised."
But a transaction did take place in December, so where does that leave them? Either way, WP's current bankruptcy status appears to be blocking the minority shareholders to exercise put options any time soon.
"The situation is so unclear, so complex. We don't know anything for sure yet," says Borowik.
She believes that neither party cares much about the company itself, noting that "the business is losing time, losing money and losing energy in this."
And the chances for a resolution appear bleak.
"This is an impasse, a deadlock. And I don't think it will be settled soon," she says, adding that TPI bullies the minority shareholders, leaving them in a no win situation, and ditto for the portal.
And regardless of which side one leans toward, it is clear that all the parties involved desperately want a piece of the pie, one way or another. Perhaps the only pertinent question is whether the portal itself can survive this bitter struggle. Wp.pl can only hope that the end users themselves, and the advertisers in turn, couldn't care less about all the hubbub.
Michael Lars White
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