Deutsche Telekom skeptical about OTE investment

Recent skepticism expressed by executives at Deutsche Telekom regarding the value of their investment in Greece?s OTE telecom is cause for concern.

?The Germans are clearly worried about their investment in OTE,? one telecoms executive told Kathimerini. This concern, meanwhile, is attributed to two factors: the economic crisis in Greece, which had not been predicted, and a lack of German faith in OTE and the country?s overall investment climate.

The Germans have every reason to be troubled by the economic crisis. As well as seeing a reduction in demand, OTE has also been ordered to plug several holes in its budget, either through a string of extraordinary levies (which amounted to 183 million euros in 2009 and 2010) or via other forms of charges, such as the 130 million euros the Ministry of Labor ordered OTE to pay for voluntary redundancies in order to trim its employee numbers in 2005. Finally, there are the state?s debts to the telecoms operator, which are believed to be in excess of 100 million euros.

The partially state-owned telecommunications provider has also seen a massive flight of customers, either because their reduced incomes have led them to cancel their subscriptions or because they have found a better deal with competitors. In the last three years alone, during which DT invested in OTE, the Greek company lost more that 2 million subscriptions (from 5.6 million connections in June 2008 to 3.65 million in June 2011).

The introduction of broadband Internet technology has somewhat boosted OTE?s revenues, though this too began to slide as of 2009, when its main competitors (Forthnet, HOL and Cyta) began offering the same services at cheaper prices. OTE has filed complaints with the regulatory authority EETT about this issue, saying that it has not been permitted to compete on equal terms with other companies. Meanwhile, OTE?s ADSL service has also experiences a slump over recent months for the same reasons.

All of this, however, is just one part of why the Germans are worried about their investment. The other has to do with the idiosyncrasies of the DT executives, who, according to pundits, marched into OTE without first properly exploring the political and institutional network of relationships within the organization. For example, just a few days before DT purchased its initial 20 percent share in OTE in May 2008, consultants for the German company did not know that employees at OTE enjoyed the same permanent status as other Greek civil servants.

This issue became a real thorn in DT?s side when it realized that it could not shake up the employment system and structures, as these are protected by laws which state that changes can be made only with the assent of employees or through new legislation.

Last May, when the government was discussing the further privatization of OTE, DT executives stressed the issue of the labor framework to then Finance Minister Giorgos Papaconstantinou, who, however, rejected their proposal for a shake-up of the system due to the fact that the government was already under fire over the proposed sell-off of OTE.