Still no agreement for OTE, under attack from unions and EC

8 May 2008

Reuters reports that Deutsche Telekom (DT) has not yet reached an agreement in negotiations with the Greek government to gain a stake and management control of Greek incumbent telco OTE. ‘Currently, we have not taken a decision,’ DT’s CEO Rene Obermann said this morning, reiterating that an agreement was conditional on the German firm taking ‘full management role.’ DT recently agreed to acquire a near-20% stake in OTE from Greek investment group Marfin Investment Group (MIG) and aims to raise this so that it has an equal share with the Greek government, provided both sides can agree on issues including share price and key executive board appointments. According to previous media reports, the Greek authorities are pressing to retain control over wage agreements, strategic alliances and investments. ‘We haven’t agreed on all issues yet, we have some thorns to deal with…such as the issue of veto and the price,’ Finance Minister George Alogoskoufis said in an interview with NET TV earlier this week. The minister denied press reports that the government had agreed to sell shares to DT at EUR28 (USD43.3) each (compared to the EUR26 price agreed with MIG), whilst asserting that ‘Greece will have a veto over all strategic issues including national security,’ and adding that DT will have to consult with the state on labour issues.’ The state currently holds 28.03% in the former monopoly, including a direct stake of 24.96% and an indirect 3.07% through the DEKA fund. DT reserves the right to cancel the deal with MIG if it fails to reach agreement with the state. Meanwhile, OTE’s main workers’ union led a two-day strike on Tuesday and Wednesday in protest at DT’s plans, with around 1,500 strikers marching through Athens.

In related news, Reuters reports that the European Commission (EC) has given Greece two months to change a recent law which blocks private takeover bids for ‘strategic companies’ including OTE. The legislation introduced approval requirements for acquiring more than 20% in the ex-monopoly last December, effectively blocking MIG from raising its stake any further. An EC spokesman said, ‘the new provision on investment in strategic companies is considered to be incompatible with the free movement of capital…The Commission had decided to launch a legal action against Greece and has given it two months to reply.’ The legal action was initiated with a letter of formal notice, the first of a three-stage process that ends in the European Court of Justice, which has the power to force Greece to change its laws and fine it, if it finds the complaint justified.

Greece, Cosmote, Deutsche Telekom (DT)