Greece selling OTE stake ‘immediately’

24 May 2011

Greece has announced that it will sell a stake in Hellenic Telecommunications Organisation (OTE) – up to its entire 16% holding in the telco – without further delay as the country attempts to get a faltering privatisation programme back on track to reduce its huge debt burden and alleviate pressure from the European Union (EU) and International Monetary Fund (IMF). With next month’s scheduled EUR12 billion (USD17 billion) EU/IMF aid tranche threatened, and further forced debt restructuring looming, finance minister George Papaconstantinou announced that the first stakes to be sold off are in OTE – which operates fixed and mobile services in Greece and the Balkan region – alongside postal savings bank Hellenic Postbank, the two main ports of Thessaloniki and Piraeus (Athens), and the Thessaloniki water company, raising up to EUR5.5 billion this year as part of a EUR50 billion sell-off plan for 2011-15. A crucial aim this year is to cut the budget deficit to 7.5% of gross domestic product (GDP), down from 10.6% in 2010, with other strategies to be introduced alongside the privatisations including the forming of a sovereign wealth fund, additional austerity measures which raise planned budget cuts to EUR6 billion, more pay reductions for public sector workers and redundancies.

Earlier this month OTE’s largest shareholder, Deutsche Telekom (DT), which currently holds 30% equity and joint management control with the Greek state, confirmed that it may up its stake to 40% as the government has a put option expiring at the end of 2011 to sell a further 10% to the Germans at a price 15% above its average stock market value over the preceding 20 days. A DT spokesperson confirmed that the terms were not negotiable, adding that the German giant had no plans to buy additional shares in OTE on the stock market, despite the fact that if the German group lifts its interest to 33% it will trigger a mandatory public offer under stock exchange rules. As a cautionary note, as reported by CommsUpdate, DT also expressed the need to talk extensively with the Greek government on issues including domestic telecoms market regulation and labour relations before it commits to increasing its stake in OTE, whose shares have devalued sharply since it joined the DT group in November 2008. The group’s head Rene Obermann called Greek telecoms watchdog the EETT the ‘toughest’ regulatory authority that he has ever encountered. Regarding labour relations, the wage bill at OTE – which includes the Cosmote mobile group – is 46% of operating costs, compared to the 25% average across Europe, and DT is thought to be aiming to negotiate a change in rules to force this percentage down.

Greece, Cosmote, Cosmote (old), Deutsche Telekom (DT)