OTE to get majority in Romtelecom

After months of tense negotiations with the Romanian government, telecoms operator OTE appeared to have finally achieved majority control of Romtelecom, resolving an issue that has contributed to a major slide in its stock since the beginning of the year. OTE yesterday confirmed that the Romanian government had approved its request for a $200 million equity increase for Romtelecom and a boost in its stake to over 50 percent. «We are aiming for at least 51 percent. It could be more, depending on a valuation of Romtelecom,» Dimitris Kouvatsos, chief financial officer, told Kathimerini English Edition. He said a restructuring plan focusing on cutting costs and modifying investments will be implemented with immediate effect after the board of directors at Romtelecom approved the strategy. Imminent changes are believed to include drastic job cuts, tariff hikes and debt restructuring. OTE is due to meet with the Romanian government next week to finalize details. OTE currently holds a 35 percent stake in Romtelecom, which it acquired for $675 million in 1998. The Romanian investment was its biggest overseas venture, and was planned as the showpiece of OTE’s Balkan expansion. But heavy start-up costs associated with mobile subsidiary Cosmorom and cash flow problems have plagued Romtelecom, making it imperative that it gets an injection of $450 million this year. The Romanian government, however, had been dragging its feet over an equity increase and putting pressure on OTE to buy the remaining 65 percent of Romtelecom. Uncertainties over Romtelecom have contributed to a 36-percent drop in OTE equity since the beginning of the year. The stock shed 1.23 percent yesterday, while over the week it has lost about 9 percent of its value. Investors still have doubts over the Romanian investment despite yesterday’s announcement from OTE, said Vassilis Vlastarakis of Contalexis Financial Services. «There’s still a great deal of uncertainty over the agreement, which has yet to be signed,» he said. «Profit-taking has also come from expectations of declining nine-month profits.»