By Lefteris Papadimas - Reuters

OTE announced yesterday it planned to bite the bullet and shut down its debt-laden Romanian mobile unit CosmoRom, drawing fire from the Romanian government.

“Our intention is to shut down CosmoRom, but to keep the (mobile) license as an asset of the company,” OTE Chief Executive Lefteris Antonakopoulos told Reuters.

Former state monopoly OTE, which has embarked on regional expansion to offset the loss of market share at home, acquired CosmoRom earlier this year as part of a deal giving it majority control of Romtelecom, its biggest foreign investment.

While OTE has repeatedly defended the strategy of expanding into Romania, the Balkans’ biggest country with a population of 23 million with prospects of European Union entry in 2007, concerns over the risks of the expansion led to recent credit downgrades by Standard & Poor’s and Moody’s.

CosmoRom, with a market share of less than 2 percent and liabilities of around 190 million euros, is a case in point.

“We are not willing to put any more money (into CosmoRom), we do try to reduce its debt,” Antonakopoulos said during a break in a one-day presentation for analysts and investors.

The Romanian government, which still owns 46 percent of CosmoRom parent Romtelecom, warned OTE it risked losing its mobile license if it chose to wind up the mobile unit.

“The possibility that Romtelecom (CosmoRom parent) can keep the (mobile) license is ruled out,” Communication Minister Dan Nica said in a statement.

OTE had no immediate comment on the remarks.

Last month OTE’s chief executive told shareholders the group would decide by early October the fate of CosmoRom after settling the issue of its debt with banks and suppliers.

He said then that options included continuing to work with CosmoRom as well as closing it down and turning to cooperation with local mobile operators.

OTE shares ended up 0.2 percent at 9.82 euros, slightly outperforming the broader market, which declined 0.67 percent.