OTE sticks to its guns on Romtelecom

OTE yesterday underscored the urgency of capital infusion for Romtelecom, saying it was willing to participate in a share capital increase to alleviate the Romanian fixed-line monopoly’s cash-flow problems in exchange for a majority stake. «Romtelecom needs financial support and we are willing to contribute to a capital increase which would lead to majority control,» Lefteris Antonakopoulos, chief executive, said. The Romanian operator needs an injection of $450 million this year to resolve its cash-flow problems. He said an increase in OTE’s 35 percent holding would depend on how Romtelecom is evaluated. Antonakopoulos said OTE is currently negotiating with the Romanian government on the issue but declined to give further details. A restructuring plan laid out for Romtelecom and approved by its board and the European Bank for Reconstruction and Development, in the meantime, foresees drastic job cuts, tariff hikes and debt restructuring. Last week, OTE announced that it had secured the Romanian government’s approval for a share capital increase for Romtelecom which would result in its acquisition of a majority stake in the company. It was still early to bring up the issue, the Romanian government said over the weekend, suggesting a lingering resentment that it had capitulated to OTE’s demand for a capital boost for Romtelecom. Romania had been dragging its feet over the issue and putting pressure on OTE to take over its 65 percent stake. «It is premature to discuss if somebody will increase its stake and by how much,» Reuters quoted Romanian communications minister Dan Nica as saying. He said negotiations with OTE would center on changes to the 1998 contract. Cheered by the news that OTE appeared to have the problem under control, investors sent its stock up by 2.13 percent yesterday. Uncertainties over Romtelecom have contributed to a 36 percent slide in OTE shares this year. OTE acquired its 35 percent stake together with management rights in Romtelecom in 1998 for $675 million, making it its biggest ever overseas venture. The Romanian operator posted a loss in the first quarter of the year but returned to the black in the second quarter.