Talks with Romania continue
After months of tense negotiations with the Romanian government, telecoms operator Hellenic Telecommunication Organisation (OTE), Greece’s major telecoms operator, appeared to have finally achieved majority control of Romtelecom, (Romania’s leading telecoms company) resolving an issue that has contributed to a major slide in its stock since the beginning of the year.
OTE late last week confirmed that the Romanian government had finally approved its proposal for a $200 million equity increase for Romtelecom and a boost in its stake to over 50 percent.
“We are aiming for at least 51 percent. It could be more, depending on a valuation of Romtelecom,” Dimitris Kouvatsos, OTE’s chief financial officer, told Kathimerini Newspaper English Edition.
He said a restructuring plan focusing on cutting costs and modifying investments will be implemented with immediate effect after the board of directors at Romtelecom approved the strategy. Imminent changes are believed to include drastic job cuts, tariff hikes and debt restructuring.
OTE’s Senior management is due to meet with the Romanian government later this week to finalize details.
OTE currently holds a 35 percent stake in Romtelecom, which it acquired for $675 million in 1998. The Romanian investment was its biggest overseas venture, and was planned as the showpiece of OTE’s Balkan expansion.
But heavy start-up costs associated with mobile subsidiary Cosmorom and cash flowproblems have plagued Romtelecom, making it imperative that it gets an injection of $450 million this year. The Romanian government, however, had been dragging its feet over an equity increase and putting pressure on OTE to buy the remaining 65 percent of Romtelecom.
Uncertainties over Romtelecom have contributed to a 36-percent drop in OTE equity since the beginning of the year.
Investors still have doubts over the Romanian investment despite the announcement from OTE, said Vassilis Vlastarakis of Contalexis Financial Services. “There’s still a great deal of uncertainty over the agreement, which has yet to be signed,” he said. “Profit taking has also come from expectations of declining nine-month profits”.
(From KATHIMERINI English Language Edition 26-27/10/02)