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Free-market pirates March 2, 2008

Posted by grhomeboy in Telecoms.
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The poor services offered by several private telecommunication companies that compete with OTE state telecom [Hellenic Telecommunications Organisation – OTE] have created problems for some 800,000 households across Greece.

The problems can often be attributed to the immaturity of the local market but, unfortunately, more often seem to derive from the dubious tactics by certain companies to advertise services they cannot provide for in a credible manner.

Greek consumers are not interested in the reasons behind their distress. They only want these problems to go away – and rightly so.

One hopes that the responsible authorities, including the Telecommunications and Post Commission (EETT), the general consumer secretariat and the consumer ombudsman will live up to their duties and take measures to punish any opportunistic firms that seek to exploit the deregulation of the market by creating problems for consumers.


OTE telecom offers early retirement to employees February 29, 2008

Posted by grhomeboy in Business & Economy, Telecoms.
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Hellenic Telecommunications Organisation, OTE, the biggest Greek phone company, said it will offer incentives of as much as 40,000 euro to 200 employees to leave this year.

The voluntary exit plan applies to employees who have one to five remaining years of service until retirement, who may get exit bonuses of 5,000 to 40,000 euro, OTE said in a Regulatory News Service statement.

OTE has reduced its workforce to shore up earnings at the Greek fixed-line phone unit as sales declined. The company spent more than 1 billion in 2005 to pay pensions and benefits to about 5,500 workers to retire early, overcoming union opposition.

The reductions allowed Chief Executive Officer Panagis Vourloumis to hire younger workers, who cost the company less and can be fired, unlike older workers, who can’t be sacked because of laws dating from when OTE was the country’s monopoly.

The plan announced yesterday is supported by the company’s OME-OTE union, according to the statement. Employees have until March 21 to apply and departures will begin from April. All employees applying will leave by the end of the year. OTE ’s Greek phone unit had a workforce of 11,560 at the end of September.

Greek OTE sells Cypriot assets February 28, 2008

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Cyprus Trading Corporation (CTC) said it had signed an agreement to buy stakes in Greek telecom group OTE’s subsidiaries OTEnet (Cyprus) and OTEnet Telecommunications. CTC will pay 3.99 million euros, the company said in an announcement.

After the transaction, which is subject to approval by Cyprus’s competition commission, CTC will raise its stake from 20 percent to 100 percent in OTEnet (Cyprus) and will control 87.25 percent of OTEnet Telecommunications.

OTE goes for full control of Cosmote November 13, 2007

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Hellenic Telecommunications Organization (OTE) SA, Greece’s biggest phone company, gained the most in almost two months in Athens trading after it bid 2.8 billion euros ($4.1 billion) in cash to buy the shares it doesn’t already own in its unit Cosmote Mobile Telecommunications SA.

OTE shares gained 1, or 4 percent, to 26, the biggest one-day gain since September 14. Cosmote shares gained 1.24, or 4.96 percent, to 26.24, the highest level since the stock began trading in 2000. The Athens-based company said it would pay 26.25 each for 107.7 million Cosmote shares, according to a bourse filing late on November 9. OTE already owns 67.8 percent of Cosmote, its most profitable unit.

Buying the Cosmote stake will give OTE access to all of the unit’s dividends and cash, as well as faster-growing sales and earnings from divisions in Eastern European countries such as Bulgaria. Cosmote, with 14 million customers in five countries, is one of the last mobile units of Europe’s former telecommunications monopolies to be publicly traded.

“Although the debt-financed nature of the offer will have a slightly negative impact on OTE’s financial ratios in the short term, it will strengthen the group’s position in the medium to long term,” Moody’s Investors Service said yesterday in a statement. The ratings service affirmed its Baa1 rating on OTE and said the outlook on all ratings “remains stable.”

OTE was raised to “outperform” from “neutral” by Natasha Roumantzi, an analyst at Piraeus Securities. The buyout will increase per-share earnings for OTE by an average of 8 percent next year and in 2009, and give the company a bigger part of Cosmote’s growth, Roumantzi wrote. The price estimate for OTE shares was raised to 28.10 from 25.60.

Cosmote is OTE’s shield against an aggressive takeover November 12, 2007

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Telecom decides to buy cell network’s minority stakes, borrowing 2.9 billion euros > The clash between the government and OTE on the one side and Marfin Investment Group (MIG) on the other is culminating for the control of the country’s telecommunications giant.

The move to acquire minority stakes at leading cellphone network Cosmote on Friday created a barrier to the threat of an aggressive takeover attempt, but the corporation is going to get burdened with a new debt of 2.9 billion. This will be the cost of the acquisition of 33 percent of Cosmote, about 110 million shares, by its parent company.

The move was not at all popular with MIG. This was evident by the visit of the group’s Vice President, Andreas Vgenopoulos, on Friday afternoon to the office of the Chairman and CEO of OTE, Panagis Vourloumis. Vgenopoulos aggressively asked the OTE head to call off the meeting of the governing board of OTE which was going to start 90 minutes later, with the issue of the acquisition of minority stakes of Cosmote as the main subject.

Vourloumis, however, did not accept Vgenopoulos’s demand and on Friday afternoon the board members decided to acquire all Cosmote shares that did not already belong to the corporation through a public offering. OTE will pay 26.25 percent per Cosmote share. Shares are priced at a premium of 5 percent of the closing price on Thursday on the Athens Stock Exchange. Toward this end, OTE will proceed with the issuance of a loan jointly organized by four foreign banks, including Merrill Lynch and Morgan Stanley.

According to Vourloumis, the new borrowing by his company is not expected to hurt its credit rating. He informed the board that the ratio of borrowed to equity capital of the company will rise to 1.9 from 1.2 today. This, the OTE head suggested, is tolerable for a corporation the size of OTE’s.

Vourloumis also informed the board members that Cosmote will not be absorbed by OTE. He believes that the cellphone company would be better off if it stayed outside its parent firm, as it has reached a particularly satisfactory level of business operations and efficiency, which might be threatened in the case of an absorption attempt by the parent firm.

The same attitude, more or less, was followed by Deputy CEO Michalis Tsamaz when speaking on Friday to analysts on the occasion of the publishing of the nine-month results of Cosmote. He said that a closer relationship between the parent and subsidiary firm will allow the group to compete better with its multinational rivals, Vodafone and Wind.

The Vourloumis proposals on the Cosmote minorities were voted for by all board members except for Theodoros Veniamis, the member of the investment committee of MIG. He argued that such an issue should have been discussed at the extraordinary general meeting of OTE that had taken place two days earlier and not in the meeting of the board.

Yet the acquisition of the Cosmote minority stakes is a barrier to the threat of an acquisition move by OTE itself. The telecom shows low borrowing and as a result a candidate buyer would need to spend 2.5 billion to 3 billion to buy it out. As soon the buyers do that, they could then make OTE borrow money to give them their money back, in a leveraged buyout.

This is exactly what happened in 2006 with former TIM Hellas, now Wind, which was over-indebted with 3 billion euros with the main purpose being the offering of capital gains to its shareholders, who reaped them through capital returns. However, the new borrowing to which OTE is resorting may now render it less attractive for such an acquisition.

Yet this is not the only reason why OTE is spending 2.9 billion: The corporation’s administration was forced to make this decision as Economy and Finance Minister Giorgos Alogoskoufis had rejected the plan of acquiring the minority stakes of Cosmote through an OTE share exchange. In such a case, the stake that the state would have in OTE would become less, from 28 percent to about 24 percent, which is something the government is not prepared to discuss.

One of the chapters in the book of international financial reporting standards (IFRS) that defines the meaning of “associate business entity” was under scrutiny by OTE legal advisers in the last few days, as it almost describes the company’s relation to MIG.

The IFRS say that “a business entity is considered associate if the investor has significant influence on it even if it is not a subsidiary or part of a common business platform.” So how is “significant influence” defined? According to IFRS, this applies when the investor owns 20 percent of voting rights. There is, however, an alternative definition: “The investment may be smaller than 20 percent, as long as this influence can be clearly proven.”

Slowly, the situation becomes clearer as it is obvious that this can happen in more than one way: either by representation on the governing board or a similar administrative entity, or by participation in policy-making procedures. This in effect also means participation on the governing board.

This is the way OTE managers interpreted the persistence by MIG to acquire representation on the corporation’s board. In this fashion MIG could acquire “significant influence,” characterize OTE as its associate business entity and include it in its financial report. At least that is the interpretation given by OTE.

They would therefore have to deal with a stakeholder who would control more than 15 percent of their share capital and at the same time participate on the board and its key decisions, so as to exercise significant influence and proceed with an economic merging.

What would this mean? Simply, that MIG could incorporate OTE into its single financial report, add the corporation profits or capiralization to its own. Effectively, OTE would be like a subsidiary of MIG, which would cause great alarm at OTE headquarters. That is what drove the OTE board to its decisions on Friday. 

OTE is set to approve merger with Cosmote November 12, 2007

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The Governing Board of telecom giant OTE was last night set to agree to acquiring all minority stakes of subsidiary Cosmote, Greece’s largest mobile phone network.

Sources suggested that OTE intends to proceed to a public offering of 26.25 per Cosmote share in cash and borrow up to 2.9 billion euros to fund the move. OTE wants to merge with Cosmote to help offset a decline in its customer base since the liberalization of the telecoms market in 2001 which has seen clients leaving traditional fixed-line for mobile telephony services. In view of this the Athens Exchange suspended trading in shares of both companies yesterday, pending a buyout announcement.

Earlier yesterday Cosmote reported its profits rose 1 percent to 275.9 million euros in the year’s first nine months, hampered by foreign exchange losses. But sales grew 38 percent on soaring customer numbers, a sign its regional growth policy is bearing fruit. While profit was flat, Cosmote’s subscribers rose by almost 3 million in the nine-month period, bringing its total customer base to 14.1 million, 42 percent higher than last year.

Such customer growth is one of the reasons OTE is keen to completely incorporate Cosmote, analysts said. “It makes sense for OTE, financially and strategically as Cosmote is its fastest growing segment,” said analyst Vangelis Karanikas, at HSBC Securities. “It has strong customer growth, strong cash flow and a strong dividend.”

OTE currently holds about 67 percent in Cosmote and has been considering raising its stake to 100 percent to offset falling fixed-line revenues from increased competition. OTE expects to lose about 200,000 clients by the end of the year as smaller competitors such as Internet provider Forthnet and mobile giant Vodafone enter the fixed-line market.

On Thursday OTE had received shareholder approval to amend its charter to issue new shares, a move analysts say could make it easier for OTE to make a bid for Cosmote via a share swap. The remaining 33 percent stake is worth about 2.6 billion euros at current market prices.

Cosmote shares trade about 19 times estimated 2007 earnings, at a slight premium to European peers such as France’s Bouygues with a multiple of 17, according to Reuters Estimates. The shares, up about 11 percent so far this year, have underperformed the broader Greek market, which has gained about 21 percent.

Greece’s Cosmote has 3 million subscribers in Romania October 31, 2007

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Cosmote said it surpassed 3 million subscribers in Romania, beating a full-year target announced just a week ago.

Cosmote has added more new customers than local competitors including Vodafone Group Plc and France Telecom SA for the past three quarters, according to an e-mailed statement from the company. The Romanian unit is expected to be profitable on a net level in 2009, according to the statement.

Athens-based Cosmote is expanding its network in the country of 22 million inhabitants and adding more stores to win new customers. Together, Vodafone and France Telecom have almost 17 million clients in Romania. Cosmote, Greece’s biggest mobile-phone company by users, owns a 70 percent stake in its Romanian unit, and Romtelecom SA, the country’s former phone monopoly, owns the rest. Both companies are majority-owned by Hellenic Telecommunications Organization SA, [OTE], Greece’s biggest phone company.