If you only glance at Greek telco OTE’s first quarter results, you’d be forgiven for wondering why Deutsche Telekom is spending anything up to €400 million to buy an extra 10% of the firm.
OTE’s group profit more than halved during the quarter – down from €65.7 million in 1Q10 to €25.1 million this year – and revenues fell from €1.4 billion to €1.2 billion, with mobile sales particularly hard hit, falling €75.2 million year-on-year.
The Greek government’s motivations are clear enough. The country is bankrupt and part of various bailout agreements with the European Union and International Monetary Fund require it to shed holdings in a variety of national businesses in a bid to reduce its debt.
However, this is not a fire sale, and there’s nothing to suggest Deutsche Telekom is getting a bargain. What it does get, though, is a total stake of 40%. That puts it on par with institutional investor’s stake of 40.42%, and effectively grants it control of the Greek carrier.
The German incumbent all-but explained the rationale in its own first quarter results, noting that COSMOTE is “building up margins in the tough environment,” and is “performing excellently in a peer comparison.”
OTE has also been busy cutting costs over the past year – shedding €112 million from operating expenses year-on-year, mostly from headcount reductions.
A final benefit for Deutsche Telekom is Serbian incumbent Telekom Srbija, in which OTE is a shareholder. The Serbian government recently rejected a tactical bid for 51% of the telco from Telekom Austria, which was apparently designed to put Deutsche Telekom off the scent.
With the possibility of all-but controlling OTE now in the cards, perhaps Deutsche Tel is playing its own tactical game.