OTE to slash at least 9,000 jobs at Romtelecom to reduce costs

OTE Telecom announced yesterday it plans to cut at least 9,000 jobs over the next two years to clamp down on costs at cash-strapped Romtelecom after taking control of the Romanian phone company. OTE said it plans to raise Romtelecom’s profits by tightening its grip on operating costs, primarily by cutting jobs. It said it cut 8,500 jobs at Romtelecom last year. Romtelecom’s revenues are expected to be flat in the next two years due to the loss of market share after it gave up its fixed-line monopoly at the beginning of 2003 and also because of tariff rebalancing, OTE said. OTE is targeting a core earnings (EBITDA) margin of about 40 percent by 2005 for the Romanian operator, its biggest foreign investment. Capital expenditure over the next three years will total $250 million to $300 million, it said. For the nine-month period ending September 2002, Romtelecom had consolidated revenues of 713 million euros and an EBITDA margin of 22.8 percent. OTE last week signed an agreement with Romania which raises the Greek company’s stake in Romtelecom to 54 from 35 percent. Under the deal, which comes after months of wrangling between OTE and the Romanian government, OTE will inject $243 million into the cash-strapped, fixed-line operator. The deal comprises a $145 million cash injection and a debt-for-equity swap. OTE will acquire another 3.12 percent for an extra $30.9 million. OTE’s shares on the Athens bourse perked up on the news, to close with gains of 1.24 percent at 11.40 euros. Worried that foreign investments are not offsetting a domestic earnings squeeze from new competitors, investors have knocked about 1.5 billion euros off OTE’s market capitalization since the end of August. OTE’s current market value is 5.67 billion euros. OTE has admitted its policy of investing abroad lacked a clear focus and aims to bring current investments into shape with a view to becoming the chief operator in the Balkans. Chief Executive Lefteris Antonakopoulos said recently that a policy of «graceful exit» may be taken in the case of some of OTE’s international ventures. But OTE has persistently defended its presence in Romania, citing the tremendous growth potential of a country where fixed-line penetration is only 18 percent versus 30 percent in neighboring countries such as Hungary. OTE has interests from Albania to Yemen, with a regional footprint that includes fixed-line investments in Serbia, Armenia and Romania as well as mobile telephony interests in Albania, the Former Yugoslav Republic of Macedonia, Romania, Armenia and Bulgaria. (Reuters)