Telenor to sell half its stake in CosmOTE

Shares of CosmOTE tumbled 4.31 percent yesterday after Norwegian telecommunications group Telenor announced plans to sell half of its 18 percent stake in the Greek mobile telecoms company, resolving an issue that had been up in the air since last year. The long-term benefits of the sale should outweigh the short-term pressure on the stock, said Theodore Ritsios, telecoms analyst at P&K Securities. «In the short term, Telenor’s decision will put pressure on CosmOTE. In the long term, however, it will improve the trading behavior as the free float will rise to 25 percent,» he said. In a stock market filing yesterday, Telenor said it would sell a 9 percent stake, or 29.71 million shares, via a book-building process. Calculated at last Friday’s closing price, the stake would be worth 289 million euros, while after yesterday’s drop to 9.32 euros, it would raise 277 million euros for the telecoms operator. Investment bank Smith Barney was auctioning the shares to institutional investors within a price range of 9.16 to 9.35 euros, Reuters news agency reported yesterday. Ritsios said it was unlikely that OTE, the majority owner with a 59 percent stake, would seek to boost its holding. OTE, which backed out twice last year from buying out Telenor, recently reiterated that its main priority would be toward its Romanian investment. It is also constrained by the need to generate cash this year and its proposed goal of maintaining a dividend yield this year similar to 2002. Telenor’s decision to divest its stake is in line with its strategy of withdrawing from mobile businesses where it would never be able to acquire majority control. It has interests in mobile companies in 12 countries. CosmOTE, the leading mobile operator in the country with an estimated 41 percent market share, recently reported solid results for 2002, lifting revenues by 30 percent to 1,201 million euros and EBITDA by 27 percent to 520.5 million euros. It is targeting revenue growth exceeding 15 percent and an EBITDA margin of about 43 percent this year. Early this month, CosmOTE reported an 18.4 percent jump in subscribers to 3.64 million active users, putting it slightly ahead of rival Vodafone Panafon. It also competes with Stet Hellas and InfoQuest.