OTE faces bailout fallout; posts ‘unexpected’ 4Q loss on RomTelecom impairment

23 Feb 2012

Greek and southeast Europe telecoms group OTE, jointly controlled by Germany’s Deutsche Telekom and the Greek government, has posted a net loss in the fourth quarter of 2011 due to a write-down on the value of its Romanian fixed line subsidiary RomTelecom. Reuters reports that the quarterly net loss of EUR77.1 million (USD102 million) was ‘unexpected’, and compared to a net loss of EUR91.7 million in the same period of 2010, when the Greek operator also booked impairment charges on RomTelecom as well as other units. OTE’s consolidated turnover, including southeast Europe mobile group Cosmote, fell by 6.3% year-on-year to EUR1.246 billion in the three months to the end of December 2011, marginally below the average forecast in a Reuters poll of analysts, while reported EBITDA was around EUR10 million below analysts’ predictions, at EUR408 million.

TeleGeography notes that harsh economic challenges face OTE in the wake of this week’s new bailout deal between the eurozone countries and Greece. The country’s second major bailout package provides EUR130 billion in loans – thereby avoiding national bankruptcy when debts mature next month – and writes off 53.5% (EUR107 billion) of national debt owed to private creditors including Greek and foreign banks. In return, Greece must comply with terms including new legislation which prioritises debt repayments over funding of government services. The deal will mean more austerity measures and yet-deeper public spending cuts. Alongside the latest agreement, new measures passed by parliament earlier this month include EUR3.2 billion worth of cuts to salaries, pensions and various state budgets – sparking fresh public protests. OTE’s workers union has fought against previous cutbacks and changes including 2008’s arrival of Deutsche Telekom, which itself has pressed for significant reductions in the Greek telco’s wage bill as well as greater freedom to sack employees. The latest round of government cuts to appease Greece’s international creditors include a specific EUR15 million to be taken from the state funding budget for OTE as well as pension and public sector salary cuts which will affect the firm’s staff. Parliament will vote late tonight to finalise the bailout deal.