Romanians, OTE agree on Romtelecom
The Hellenic Telecommunications Organization SA (OTE) and the Romanian government have reached an agreement that will allow the Greek company to inject $243 million in new funds into Romtelecom in exchange for majority ownership, OTE said yesterday. «Following intensive discussions between the parties over the past few weeks, the parties have agreed, subject to approval by the Romanian Cabinet and the board of OTE, on the proposed terms of a transaction to the value of $243 million for Romtelecom,» OTE said. «The consideration will consist of a combination of cash and conversion of debt into equity of Romtelecom. In addition, the transaction will involve the acquisition of a further limited number of existing shares from MCIT (the Romanian Ministry of Communications and Information Technology) as representative of the Romanian State. The two transactions will see OTE assume majority ownership of the share capital of Romtelecom,» the announcement said. The agreement appeared to end an impasse, allowing OTE to carry on with its investment in Romania’s fixed-line monopoly. OTE already owns a 35 percent stake in Romtelecom and has voting control over another 16 percent. Romanian Communication Minister Dan Nica declined to reveal the size and the value of the stake in Romtelecom that would be sold directly to OTE, The Associated Press reported. Until now, OTE was willing to inject funds into the company as a way of boosting its stake and getting majority ownership, but rejected the government’s request to buy new shares. The compromise follows two weeks of intense negotiations over the fate of Romtelecom. The company badly needs funds to pay its debts and invest heavily to prepare for competition. Its monopoly on fixed-line telephony ends next year. OTE paid $675 million for its 35 percent stake in 1998. This was its biggest overseas venture and was planned as the showpiece of OTE’s Balkan expansion. Heavy start-up costs related to mobile subsidiary Cosmorom and cash flow problems plagued Romtelecom, demanding an injection of $450 million this year. The Romanians had been pressing OTE to buy the remaining 65 percent.