The Greek government on Monday agreed to sell a 10 % stake in Hellenic Telecom (OTE) (Maroussi, Greece) to Deutsche Telekom AG (Bonn, Germany) as the Mediterranean state kicks off privatization deals to cut its debt pile.
The European Union and IMF have been pressing Greece to conduct large-scale privatizations to raise funds for reducing its huge debt. Greece has pledged to raise 73.2 billion from privatizations by 2015 and the pre-arranged OTE sale is the first state asset to be shifted as part of the program. The government exercised its "put" option to sell a 10 % stake in OTE for around $585.7 million.
Once the shares have been transferred, the Greek state will hold 10 % plus one vote in OTE, with Deutsche Telekom owning 40 % plus one vote. Greece wants to sell a further six % but Deutsche Telekom is unlikely to buy it, unless the government agrees to scrap working rules that make staff at OTE's Greek fixed-line virtually unsackable.
High labor costs, recession across southeast Europe and tough regulation have caused a profit slide at the company and have forced Deutsche Telekom to write down $1.3 billion from its $5.5 billion investment.
A Deutsche Telecom spokesman said the ball was now in Greece's court. "If the Greek state wants to sell its stake, we will see if it makes economic sense for us (to buy)," the spokesman said on Monday.
Chief Executive Rene Obermann said last week he was open to buying further OTE shares but all depended on the conditions.
Under a 2008 shareholders' agreement, the government's stake has to fall below 10 % for the state to start losing its extensive veto rights over the company's management. Since 2008 Deutsche Telekom has amassed a 30 % stake in southeast Europe's biggest telephone operator to expand its footprint in Greece, Romania, Bulgaria and Albania.
It bought most of the shares for more than $38 apiece, a premium of at least 30 % at the time. Under the deal, the Greek government had a put option until the end of the year to sell a 10 percent stake in the former monopoly to Deutsche Telekom. The remaining 50 % stake is owned by international and Greek institutional shareholders.
OTE and Deutsche Telekom shares barely moved, trading at $10.4 in Athens and $14.5 in Frankfurt respectively.
(Reporting by Edward Taylor, Peter Maushagen and Nicola Leske in Frankfurt, with Harry Papachristou in Athens; Editing by David Holmes)