Telecom firms up for sale

Plans for two major sales in the Greek telecoms sector are attracting rising interest on the part of government, investors, banks and consultants. One concerns mobile operator TIM, along with its recently acquired subsidiary Q-Telecom, and the other a stake of up to 27 percent held by the government and the management of main landline operator OTE. This interest, however, seems to be closely intertwined with developments elsewhere in Europe, particularly the proposed sale of TIM’s Italian parent company of the same name, which is a multinational concern, or the prospect of a merger of Belgacom and KPN or an aggressive buyout bid by Spain’s Telefonica. In fact, the Greek government’s recent announcement of its intention to privatize OTE seems to have been the easy preamble to developments in the sector; the rest seem rather more complicated. The two private equity funds, APAX and TPG, are selling TIM and Q-Telecom 18 months after buying them for 2 billion euros. They have hired Morgan Stanley and Lehman Brothers as consultants, which are expected to have a list of possible interested suitors ready in less than two months for an assessment of the capital gains from the sale. Unofficially, it is said that they are not prepared to sell for less than 3.2 billion euros. The list of likely suitors includes: Orascom Telecom, of Egyptian magnate Naguib Sawiris, which holds a 50 percent stake in alternative telecoms operator Tellas through its control of Italy’s Wind; Orange, a subsidiary of France Telecom; Eti Salat of the United Arab Emirates, which is also eyeing OTE’s 90 percent stake in Armenia’s Armentel; Russia’s Sistema, and South Africa’s MT. If successful, the sale of TIM and Q-Telecom will have been completed by the end of the year. With a total turnover of 1 billion euros and 3.2 million subscribers, the development will create new conditions in the market that are bound to affect OTE’s sale. If, for instance, Orange acquires both companies, France Telecom will not contest OTE, as this would automatically raise an issue of market concentration, given OTE’s control of Cosmote, the leading Greek mobile operator. For this reason, the government, which plans to keep a 7-8 percent stake in OTE, is closely following developments regarding TIM and Q-Telecom. The announcement of OTE’s further privatization coincided with triggered strikes in the company in which the participation rate was about 60 percent, as staff seem to fear layoffs. On Friday, even the government-affiliated DAKE-OTE labor union came out in favor of state management of the company.