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CTC acquires OTEnet unit in Cyprus March 27, 2008

Posted by grhomeboy in Business & Economy, Telecoms.
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Importer and retailer Cyprus Trading Corporation (CTC) said yesterday that it owns fully Cyprus-based OTEnet Telecommunications after it bought a 12.75 percent stake from Brightmind Enterprises.

The agreed price for the transaction was 1 million euros, CTC said in a statement. In February, CTC acquired from Greece’s telecom OTE its shareholding in Cyprus’s OTEnet for 3.99 million euros, which gave it 87.25 percent ownership of OTEnet Telecommunications.

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Greek Government keen to expedite OTE deal with Deutsche Telekom March 26, 2008

Posted by grhomeboy in Telecoms.
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Equal equity and management shares; unions cagey about job assurances > OTE workers raised the German flag to protest plans for a DT share in management.

Consultations are gathering pace for the finalization of a deal between the government, OTE telecom’s main shareholder, and Deutsche Telekom (DT), which last week agreed to buy a 20 percent stake of OTE from buyout firm Marfin Investment Group (MIG). The talks concern DT’s possible purchase of a further stake from the government, which now owns about 28 percent.

Economy and Finance Minister Giorgos Alogoskoufis told Eleftherotypia newspaper on Sunday that the government was also willing to share the management of the country’s largest telecommunications company but the form it may take would be determined by the negotiations.

The government is anxious for a speedy conclusion, fearing union opposition and stock market speculation in OTE shares. Yesterday, investment bank Credit Suisse downgraded OTE’s target share price from 26 euros to 22.50. Officials are apprehensive that any sharp decline in the OTE share price would undermine the DT-MIG agreement and scuttle any further developments.

Meanwhile, OTE unions (OME-OTE) began preparing protests against any deal with DT, fearing it may jeopardize jobs in future. A three-day strike is due to begin today. At a meeting on Saturday, OTE CEO Panagis Vourloumis assured unionists that legislation passed last year, which obliges the government to keep a minimum 20 percent share, also provides for no dismissals. Earlier on Friday, Alogoskoufis told OME-OTE officials that the government’s intention was to keep a 25 percent stake plus one share, on a par with DT, which would make them equal partners.

He also said both sides would have veto rights protected by legislation. Alogoskoufis added that the Germans had proposed retaining Vourloumis as CEO, with which the government agreed. Vourloumis urged the unions to refrain from strikes, as this would only benefit competitors, and said the deal would improve OTE’s future prospects.

OME-OTE pressed Alogoskoufis for a separate agreement on job security, to which they would be a party. The Minister referred them to Vourloumis, who said this was a matter to be decided by the new management that would emerge from negotiations. It was after this that the three-day strike was called.

The Ministerial privatizations committee is meeting either today or tomorrow to appoint the government’s consultants who will negotiate with the Germans. It is considered likely that UBS, Credit Suisse and Eurobank will be retained, as they are already well acquainted with the matter.

Greek Government may sell 8% of OTE to Deutsche Telekom March 22, 2008

Posted by grhomeboy in Telecoms.
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The Greek government may sell up to 8 percent of telecom group OTE to suitor Deutsche Telekom as part of its plans to lock in the German telco as a strategic partner, Economy and Finance Minister Giorgos Alogoskoufis said yesterday.

Deutsche Telekom on Monday agreed to buy 20 percent of OTE [Hellenic Telecommunications Organisation] for 2.5 billion euro from buyout firm MIG and has entered talks to buy a stake from the government, which owns about 28 percent, but OTE unions have called for strikes against the deal.

“A 20 percent holding in OTE by the state should be assumed as a basic fact, given that such a stake is strategic and grants the holder certain rights,” Alogoskoufis said on Flash Radio.

Greece has long sought a strategic investor for OTE, even sounding out Deutsche Telekom in the past, but had no luck as it did not want to cede management control.

“We have entered discussions, through our advisers, with DT and believe we can reach an understanding on the levels of shareholding and the form of management,” Alogoskoufis said.

Media have reported the government is willing to share the positions of chairman and chief executive of the company. Earlier yesterday OTE’s workers union called a three-day strike next week to protest against the proposed deal.

“A total strike from March 26 to 28 will be held throughout the group,” OTE’s workers union OME-OTE said in a statement. “OTE is a piece of Greece and is not for sale.”

The union will hold a meeting on March 28 to consider further strikes, it said. OTE’s powerful unions have scuttled deals in the past amid concerns that further stake sales will lead to job cuts and affect job security.

Cosmote helps OTE profits March 21, 2008

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Greece’s largest telecom group Hellenic Telecommunications Organisation, OTE, soon to be 20 percent-owned by Deutsche Telekom, grew profit by 15 percent last year, with mobile and Internet operations providing the bulk of earnings.

OTE increased its stake in its Cosmote mobile phone unit to 99 percent and focused on the Internet to offset a continuing fall in income from fixed-line telephony as Greece deregulates its telecom market. The strategy may pay off – revenue from mobiles and fast Internet ADSL take-up was significantly higher than income from OTE’s fixed-line operations.

“The full integration of Cosmote… puts us in a much better position to benefit from the growing convergence between fixed, mobile and broadband,” said OTE President and CEO Panagis Vourloumis in a statement. “The nature of our competition is changing and intensifying throughout our markets.”

The total number of ADSL subscribers in the country doubled to about 1.1 million customers, OTE said.

OTE said net 2007 profit rose to 662.6 million euro compared with 575 million a year earlier, with sales up 7.3 percent to 6.32 billion. Cosmote’s contribution to the top line was about 3.06 billion for the year. “Without Cosmote’s strong 2007 performance the results would have been worse,” said an Athens-based analyst who declined to be named. “The increase in mobile users is one key to future growth, which is also why Deutsche Telekom is interested in OTE.”

On Monday, Deutsche Telekom said it had agreed to buy a 20 percent stake in the Greek group with a view to increasing its holding as part of growth plans based on the acquisition of mobile phone companies. Deutsche Telekom is also seeking to buy part of the government’s 28 percent stake. Greek media have said Deutsche wants to lift its stake to about 30 percent.

OTE expects Cosmote, which will be delisted soon, to maintain its position as Greece’s market leader and sees the unit’s revenue for 2008 up by about 15 percent, helping offset a drop of about 4 to 5 percent in fixed-line revenue, it said.

Cyprus broadband use growing, but short of the EU average March 20, 2008

Posted by grhomeboy in Internet & Web, Telecoms.
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Broadband penetration in Cyprus had increased from 9% to 14% during 2007, which is a satisfying development, but despite the rapid growth it is still relatively low when compared to the EU average.

Eight EU member states are currently world leaders in broadband deployment with penetration rates higher than the US in 2007. Denmark, Finland, the Netherlands and Sweden have each penetration rates over 30% at the end of 2007, while United Kingdom, Belgium, Luxembourg and France had still higher rates than the US which was 22.1% in July 2007.

Over 19 million broadband lines were added in the EU in 2007, the equivalent of more than 50,000 households every day. The broadband sector generated estimated revenues of 62 billion euros and Europe’s overall penetration reached 20%. However, there is considerable scope for further consumer benefits from a reinforced single market, strengthened competition and reduced regulatory burden for market players.

The telecoms sector in the EU is worth nearly 300 billion euros (2% of EU GDP) and grew by 1.9% last year. 2007 was also the fifth consecutive year of increased investment in this sector, exceeding 50 billion euros (similar to the US and higher than China and Japan put together).

The mobile sector continues to be the largest in the telecoms market, with mobile revenues up by 3.8% to 137 billion. Mobile penetration rose further, to 112% compared to 103% in 2006. 3rd Generation (3G) mobile penetration doubled to 20% in 2007, now representing over 88 million subscriptions. As 3G took off, mobile data services grew by around 40%. While fixed telephony revenues declined 5% compared to 2006, with customers switching to mobile and IP services.

Cyprus mobile penetration reached 119% in 2007, which is above the EU average (111.8%). It has to be noted that mobile call termination charges in Cyprus are the lowest in Europe.

Incumbent operators hold more than 46% of broadband lines and in 7 EU member states control more than 60% of broadband connections. In Cyprus, Luxembourg and Finland, the incumbent’s broadband market share is higher than 70%. Concentrating on Cyprus, the incumbent (CYTA) dominates the broadband market, having a handful 88% share, and broadband access is concentrated in the main cities rather than the countryside. There is as yet no real platform competition as DSL remains the main technology for broadband services. However, a new entrant, the strategic partner of the Cyprus Electricity Authority (PrimeTel) owns an island-wide fibre optic network built on the electricity network. Though it presently reaches end-users via the incumbent, it intends to roll out its own network to the end-users, in the longer term.

The dominant incumbent operator in Cyprus has been designated as having “significant market power” with 88% of the market. A second mobile operator (MTN) has the remaining 11.2% of the market, and both already provide 3G mobile services.

The Commission has emphasised that the price of the national roaming services should be cost based, with an appropriate margin between the incumbent’s retail tariffs and its wholesale national roaming tariff (charged to its competitor). This price element is important as the second operator has not yet completely rolled-out its own network (85% in December 2007).

The incumbent operator still has a dominant position with a market share (in terms of total revenue) of 90% for all types of fixed calls and also for international calls. Alternative operators such as MTN provide voice telephony mainly through carrier selection, pre-selection and access to the internet.

Users receive TV broadcasts mainly via analogue terrestrial transmission (88%) and satellite (8%). Nine television channels (seven free-to-air and two pay-tv channels) and 13 radio stations – all with nation-wide coverage – are offered via analogue terrestrial transmission. Cable and xDSL have each less than 5% end-user penetration and are in the early stages of development. This said 2012 has been fixed as the date for switching-off analogue broadcasts.

In trying to rollout fixed infrastructure, market players have voiced heavy criticism of the very slow granting of the necessary “rights of way”, and the different practices employed by different authorities involved in the licence granting process. In response to infringement actions initiated by the Commission, the competent Cypriot authorities have now taken steps to ensure that applications for the acquisition of rights of way will be evaluated within 6 weeks.

Mobile operators still face difficulties in that most sites in rural areas are government owned. Approval for construction can thus be a lengthy process. Legislation in order to improve this situation is still pending as it has not yet been adopted in 2007. 

Greece’s phone regulator appeals reversal of fine for Vodafone March 18, 2008

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Greece’s telecommunications regulator appealed against a court decision that reverses a 1-million-euro fine imposed by the watchdog on Vodafone’s Greek unit.

The regulator also plans to appeal against court decisions reversing fines imposed on cellular operators Cosmote and TIM Hellas, which is now called Wind Hellas, according to a statement from the National Telecommunications and Post Commission. The regulator fined the companies, the country’s three biggest mobile-phone operators, 1 million euros each in March 2006 for breaching competition rules linked to text messages. The three breached regulations when they simultaneously raised prices for short text messages in 2005, the watchdog said.

On a different subject, Ericsson won a Wind order. Ericsson, the world’s largest maker of wireless networks, won an order from Greek telecom operator Wind Hellas. Ericsson will provide network design and system integration, and supply equipment to Wind Hellas, the Stockholm-based company said yesterday in a statement.

Deutsche Telekom buys MIG’s shares in Greece’s OTE March 17, 2008

Posted by grhomeboy in Business & Economy, Telecoms.
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It was possibly meant to happen. Last week’s rumors, spread fast in business circles, while the old saying “where there is smoke, then there’s a fire” which suits well Deutsche Telekom’s case. The possible sale of MIG’s shares in Hellenic Telecommunications Organisation [OTE] could solve a major problem > If it buys, Deutsche Telekom may be the strategic partner the government was looking for.

According to various sources, MIG (Marfin Investment Group) has clinched a deal to sell all or part of its minority stake in OTE, about less than 20%, to German telecoms operator, Deutsche Telekom, at an unspecified price. The latter will be at a premium compared to the share price of OTE at Friday’s close on the Athens bourse.

OTE shares closed at 19.14 euro, up 3.35 percent on Friday, and Deutsche Telekom will most likely pay more than 24 per share to buy the stake. MIG’s average acquisition cost of OTE shares is estimated between 23 and 24 without including the cost of swaps the investment company has entered into with banks to buy the stake.

This deal is important for both MIG and the Greek government. The investment company, which will be able to raise more than 2 billion if it sells its entire stake, estimated at 19.6 percent, to the German telecoms operator. In addition, it will get some capital gains at a time bourses and credit markets are under pressure as evidenced by the Fed’s extraordinary decision to bail out Bear Stearns, the second largest underwriter in US mortgage bonds on Friday.

It is worth noting that Marvin Investment Group (MIG), an investment holding company whose biggest shareholder is Dubai Group, raised more than 5 billion last summer at more than 6 per share in the biggest IPO ever by a European company of its kind but has seen its share fall dramatically since then. It gained 8.04 percent to 4.30 on Friday on speculation about the deal with Deutsche Telekom.

The likely sale of OTE shares to Deutsche Telekom by MIG is even more important for the government, although it comes at a difficult time. The government has repeatedly said it would prefer a major Western European telecoms organization to become OTE’s strategic partner and has discouraged financial investors such as Private Equity Funds from attempting to gain control of the organization.

Deutsche Telekom (DT) was among the European operators that expressed interest in OTE in the second half of 2006 but the change of CEO at the time and DT’s other priorities at home seemed to have played a role in putting the project on hold.

It is known that the government had appointed three advisers, namely Credit Suisse, UBS and Eurobank EFG, to find a strategic investor for OTE in the last quarter of 2006 and 2007 but their efforts did not bear fruit.

It is ironic that the same company, that is MIG, which defied the government’s repeated warnings to raise its stake in OTE, is becoming the catalyst for finding a strategic partner for the country’s telecoms incumbent. The government in December last year passed legislation prohibiting investors from acquiring more than 20 percent in companies of strategic importance to the country without its approval.

By all accounts, this is a protectionist piece of legislation and the government would have had a difficult time defending it before the European Court of Justice, where it would most likely have ended up.

So, the MIG-Deutsche Telekom deal will save the government face because it will not have to go to court. Even if the case is taken to the European Court, it will have no problem doing away with the law since DT will – de facto – have become OTE’s foreign strategic partner.

The government will also be able to sell a deal with Deutsche Telekom to the international investment community as a sign that its privatization program is still on track. This may not be appreciated so much at a time when international stock markets are suffering but will be later on.

It should be noted though that how this deal will be structured is another story and will not happen tomorrow. After all, Deutsche Telekom will have to justify the deal to its shareholders. The latter must be fully aware of the Greek government’s restrictive law with regard to the shareholding of domestic corporations of strategic importance, so they will ask for clarification on that particular point.

After all, it is not popular with shareholders nowadays when their companies spend billions of euros to buy minority stakes in other companies, even if they are regarded as good assets, such as OTE mainly on account of its operations in Southeastern Europe, without having secured a road map to full control down the road. In turn, this means the government must have been informed of the deliberations between MIG and Deutsche Telekom and must have given its blessing even if it does not advertise it or even denies it in public.

It is very likely DT will ask the Greek government at some point to buy part of its 28.7 percent stake in OTE and the latter will consent to it along with the signing of a shareholders agreement. DT may even proceed with a public offering to buy the remaining OTE shares from the market and enhance its equity stake in the Greek telecoms organization.

Aside from what DT will or will not do in coming weeks and months, it is safe to say Deutsche Telekom is most likely OTE’s foreign strategic partner and this cannot escape the attention of trade unions and opposition political parties. So, the government will likely face stiffer resistance and will have to prepare for that.