Deutsche Tel gets jitters over OTE

Some interesting news out of Greece over the weekend suggests that Deutsche Telekom chiefs are finally getting jittery over their investment in OTE.
 
The German incumbent in June revealed plans to spend up to €400 million to acquire an extra 10% of its Greek counterpart, taking its total holding to 40% and putting it on-par with institutional investors which hold a combined 40.42% stake.
 
However, local newspaper Kathimerini now reports that Deutsche Telekom bosses are worried they are paying over-the-odds for an operator that is losing subscribers amid the Greek financial crisis, and which faces a number of budgetary pressures in terms of payouts and state debt.
 
The newspaper notes that OTE has “several holes in its budget,” that must be addressed. In the past the carrier has dealt with shortfalls with additional levies, however with subscriber numbers falling two million during Deutsche Telekom’s three years as an investor, taking that approach to plugging the gaps looks a more risky strategy.
 
Adding to the German executive’s worries is a state debt to OTE, which Kathimerini estimates stands at €100 million or more.
 
But the biggest problem for Deutsche Telekom appears to be a lack of homework before buying into the Greek operator. The newspaper notes executives were potentially unaware that OTE staff were on-par with Greek civil servants in terms of their employment status, making personnel changes a difficult – and expensive - process.
 
Unsurprisingly, Deutsche Telekom is keen to paint a positive picture of OTE’s significance to group 2Q results. It notes the Greek incumbent’s EBITDA stabilized during the period, and churn rates “significantly reduced”, resulting in “largely stable” earnings in spite of the tough economic environment.
 
OTE also offers Deutsche Telekom a route into the Serbian market via the Greek firm’s holding in Telekom Srbija. The indirect route appears to be Deutsche Telekom’s only way to invest in Telekom Srbija after the government sought a bid for the firm from rival Telekom Austria in May.

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