A binding bid for a majority stake in Telekom Srbija would be formally submitted by Apollo, with Telekom Slovenije as a partner, according to the source.

Telekom has unofficially already been given the go-ahead for the move by the supervisory board of the Slovenian Sovereign Holding (SSH), which manages the majority state stake in the company, with the information passed to the Telekom supervisory board on Wednesday.

According to a report in business daily Finance, the acquisition of a majority stake in Telekom Srbija is part of a plan that would eventually see Telekom Slovenije privatised with the help of Apollo, the US-based investment fund that in June signed a deal to acquire a majority in NKBM, Slovenia's second bank.

Finance says Telekom Slovenije and Apollo are to set up a special-purpose vehicle for the acquisition with Apollo chipping in the purchase money for the Serbian telco and the Slovenian state shares of Telekom Slovenije. After three years the state would withdraw from Telekom Slovenije along with Apollo.

The paper underscores Telekom Slovenije is not in a position to acquire its Serbian counterpart alone so it needs a tie-up with Apollo. Finance estimates they will need to offer more than EUR 1.5bn for the 78% stake in the Serbian telco. The deadline for binding bids expires on Monday.

Telekom Slovenije told STA it would not comment on activities related to the acquisition or sale of stakes in individual companies. The company repeated that it had submitted a non-binding bid for a majority stake in Telekom Srbija in early August and was invited in a second round of privatisation process.

Telekom Slovenije added that it was looking for new strategic opportunities in the consolidating European telecommunications market. "The economy of scale is important in the telecommunications industry so we believe Telekom Slovenije and Telekom Srbija could successfully exploit mutual synergies," Telekom said.

The SSH has meanwhile issued a press release following Wednesday's session of the supervisory board which also reviewed major activities related to management of state equity stakes, including sales activities. The release does not make a reference to Telekom Slovenije.

Pundits say that the merger of Slovenia's and Serbia's telecoms companies would create the largest telecoms provider in the region, which would in the future represent a takeover target for industry giants such as Deutsche Telekom.

The latter appeared as one of prospective buyers of Telekom Slovenije in the latest two unsuccessful attempts to privatise the company.

Apart from Telekom Slovenije and Apollo, other prospective buyers still in the bidding process for the Serbian telco are unofficially Russian MTS and buyout funds Advent, Mid Europa Partners and Novator Partners.