OTE early retirement scheme seems heading for success

Greece’s dominant telecoms group OTE appeared close to completing its voluntary redundancy plan yesterday, a key labor market reform by the center-right government which signals the way ahead for other state-controlled companies. Analysts said OTE’s crucial restructuring, which aims to cut operational costs by reducing employee numbers by one-third, was a move in the right direction to shore up profitability, albeit a delayed one. OTE’s main union told Reuters yesterday the number of those applying for the voluntary redundancy plan had already surpassed 4,500, meaning a 75 percent take-up of OTE’s early retirement offer. OTE’s management had set a participation target of 70 percent. «Applications (for early retirement) have surpassed 4,500 out of a total of 6,000 employees who were eligible to submit applications,» George Koutsibogiorgos, president of the telecom group’s main union, OTE-OME, told Reuters. Analysts had expected OTE to meet its target. «The (redundancy) plan was a success, although the result is not a surprise for the market; it was expected that the 70 percent target would be surpassed as benefits for employees are high,» said Alpha Finance analyst Dimitris Gianopoulos. OTE’s voluntary retirement plan is combined with a deal with unions for reduced benefits for new hirings – lower starting salaries, the abolition of certain benefits and the end of a previous «jobs for life» policy. «It is a very significant reform, especially the agreement concerning new employees, despite the fact that the government has dragged its heels,» Alpha Bank economist Dimitris Maroulis told Reuters. «It’s a good start for the much-needed reform of the broader public sector,» he added. The overall cost of OTE’s plan could run to 1.5 to 1.6 billion euros ($1.9 billion), with an average cost per worker of about 250,000 euros including a cash bonus of up to 45,000 euros, according to OTE trade unionists. A company source told Reuters OTE would announce the results of its voluntary redundancy program on Oct. 20. The stock market initially greeted OTE’s planned reforms enthusiastically. The telecom group’s market capitalization has increased by one-third since the start of the year when the reform plan was made public.The shares were up 0.7 percent at 17.12 euros yesterday. Reforms essential Investors now await similar moves in other state-run utilities such as Public Power Corp and Athens Water and Sewerage, which, like OTE, have double the labor costs of their European peers. «We will continue our efforts to contain operating and production costs, something which is in line with the rules of competition in the international marketplace,» Deputy Finance Minister Petros Doukas told Reuters. Greece, which has the highest debt and budget-deficit ratios among eurozone countries, needs to trim public spending and cut labour and pension costs at state-controlled companies and in the broader public sector to boost competitiveness. Since the end of last year, the government has held talks with unions in a bid to prepare the ground for social security and labor market reforms, fearing a head-on clash with Greece’s powerful unions. «I believe the government’s strategy is the reversal of workers’ fundamental rights in the entire labor market,» Christos Polyzogopoulos, head of the private sector umbrella union GSEE, told Reuters. During the summer, the government legislated for greater flexibility in working hours and lower overtime pay while also extending shopping hours. «The reason many of us are driven to take up early retirement, with a special bonus, is uncertainty about future prospects,» OTE employee Vassilis Lambrou said. Greece’s struggle to push through structural reforms mirrors similar moves in other European countries, but reform-minded governments are finding it hard to push through changes, especially at a time when global competition is forcing many companies to move jobs to low-wage countries in Eastern Europe and Asia.