The telecoms market is undergoing a radical change. Europe is already witnessing a wave of acquisitions: the former state telecommunications firms of the Czech Republic, Denmark and Hungary have changed owners and the sale of Portugal’s main telecom firm is underway. Can Greece’s former state telecoms monopoly OTE fall prey to a hostile takeover? The answer, simply, is yes, although few people in Greece dare to envisage such an outcome. The state is OTE’s main shareholder, with a 38.5 percent stake. The remaining shares are divided among mostly foreign and Greek institutional investors and Greek retail investors. Thus, there is an opportunity for an investor, or an alliance of investors, to propose to buy out the shareholders’ shares. Nothing can be ruled out, especially in this period of great volatility in the markets, with foreign investors increasing their share in OTE. The radically new future of the telecoms market will be upon us sooner than we expect, says OTE chairman and CEO Panayis Vourloumis. He refuses to be precise when asked whether OTE’s future lies in a strategic partnership with a big telecom company, but the issue is definitely one he is considering carefully. Economy and Finance Minister Giorgos Alogoskoufis has already said that he expects the state will sell OTE shares to a strategic investor in 2007. Only with a large telecom company as a big shareholder will OTE avoid a hostile takeover. Obviously the choices are limited to Europe and companies such as Spain’s Telefonica, France Telecom and Deutsche Telekom. As a high-ranking official at the World Bank, Vourloumis was responsible for Latin America. «You speak Spanish and there are rumors that therein lie your preferences,» we say, trying to read his mind. «I also speak French and admire classical German literature,» he replies, laughing. Signs of change in the domestic telecoms market abound: the sale of Intracom’s telecoms division to Russia’s Systema and Forthnet’s upcoming big capital increase are important developments. It is also likely that, in the near future, mobile telecoms service provider Vodafone will enter fixed-line telephony and a likely TIM-Tellas merger will create a strong market competitor. Public sector burden Whatever the developments, OTE expects to face greater competition in the future. «OTE is caught between the public and the private sector: it must face competition as a private sector company while still carrying the weight, the inefficiencies of a public-sector firm,» says Vourloumis. This public-sector burden also include public sector debts to OTE, in the form of unpaid phone bills, which reach 100 million euros. The Parliament alone owes 35 million euros and the rest is spread among universities, hospitals, ministries and other agencies. Well, he says, this is part of the burden, but he thinks that the main issue is «resistance to any change.» There is resistance because OTE is still considered by some to be a state agency, a false assumption. Since it is a state agency, the people who reason thus say, it must be run on an equal footing, by the government and the employees’ union. This has been the tradition. Indeed, while managers came and went, union representatives enjoyed a longer presence. Vourloumis insists, though, that the changes he has planned are being implemented and that there is no delay in the implementation of the controversial early retirement project: the only delay, he says, was in the publication of the ministerial decision which implemented the law regarding the early retirement scheme. The decision was finally published last March. Already, 2,000 employees have taken advantage of the deal’s provisions and the planned for number of 4,500 will be reached soon, says Vourloumis. «There was no other way to cut excess personnel,» he says, adding that all former state monopolies implemented voluntary early retirement programs. Germanos takeover Another big move that raised eyebrows was Cosmote’s buyout of electronics retailer Germanos. «It was Cosmote that handled the acquisition, with my approval, of course,» says Vourloumis. «I can, therefore, take all the flak without claiming for myself the positive effects (of the move),» he says. Vourloumis does not deny that the acquisition was pricey, but adds that, while the firms were engaged in discussion, the stockmarket, and Germanos’s value, increased. «This acquisition will provide us with a strong sales network that we couldn’t have otherwise created,» Vourloumis says, adding that the trend is towards a convergence of fixed-line and mobile telephony. In any case, the decision to buy Germanos was made with a view that most of the revenue will continue to come from mobile telephony, without excluding a rise in fixed-line revenue. The acquisition of Germanos is expected to strengthen OTE group’s presence, not only in the domestic market but also abroad, in Romania and Bulgaria, the two markets OTE is focusing on. By contrast, it want to sell out in Armenia, while it seems to be content with the present situation in Serbia, where it controls 20 percent of the local telecom organization.