OTE sees downside to Romanian venture
A plan by OTE Telecom for the funding of its Romanian affiliate, Romtelecom, with $450 million seems to have been shelved after failing to get approval in Thursday’s board meeting, sources say. The plan, put forward by Vice President Giorgos Skarpelis, is said to have come under fire by most board members, including the two workers’ representatives who accused management of blatant violations of the terms of the company’s acquisition of 35 percent of Romtelecom (for $675 million in 1998) and of mismanagement. Skarpelis proposed an initial disbursement of $50 million to Romtelecom early in 2002, a further tranche of $150 million later and $250 million in the form of a long-term loan. Critics noted that guarantees were not given for the loan and that the Romanian government had not intended to make a capital contribution commensurate to its interest in the company. Four weeks ago, Skarpelis is said to have prepared another plan for OTE’s acquisition of a further 16 percent in the Romanian utility, but the board meeting was canceled. Both schemes were apparently also opposed by OTE President and Managing Director Nikos Manasis. In a rather dubious decision, the OTE board left open the possibility of disbursing $50 million to Romtelecom but the issue of a convertible bond loan is considered a non-starter. Alternative solutions will be explored, including participation by the European Bank for Reconstruction and Development in a share capital increase. Critics argue that Rometelecom is facing a cash-flow crisis as a result of the exportation of OTE’s procurement practices involving the so-called programmatic agreements with preferred Greek manufacturers and direct assignments rather than through tendering. They cite, for instance, direct assignments worth 100 billion drachmas for Cosmorom, Romtelecom’s mobile phone subsidiary. Skarpelis counters that Romtelecom’s dire situation is due to interventions by the Romanian government, its pricing policy, overstaffing (48,000 employees) and inability to bring about restructuring.