Deutsche Telekom Makes Deal in Greece

By Kevin J. O’Brien

Deutsche Telekom took a step Monday toward gaining control of the former government-owned telecommunications company in Greece, in what would be a rare case of two former European telephone monopolies getting together.

Deutsche Telekom said it had agreed to acquire a 20 percent stake in Hellenic Telecom, or OTE, for euro 2.5 billion, or $3.9 billion. Apart from dominating the Greek market, OTE also owns mobile operators in Serbia, Romania, Bulgaria, Macedonia and Albania.

Deutsche Telekom acquired the stake from Marfin Investment Group, an investor based in a suburb of Athens.

In a conference call, the Deutsche Telekom chief executive, Rene Obermann, described the agreement as the first step in a bid for management control of OTE. Under Greek law, any stake of more than 20 percent in OTE is subject to approval by the government, which owns 28 percent of the company.

“It is still an open question whether the Greek government will actually permit Deutsche Telekom to gain control,” said Wolfgang Specht, an analyst in Frankfurt at Sal. Oppenheim, a private bank. “These kinds of issues, especially in Western Europe, have a tendency to be very sensitive.”

Cross-border takeovers involving former telecommunications monopolies in Western Europe have been unusual, though increased competition in domestic markets has put pressure on these companies to consider such combinations.

In 2002, the former Swedish national operator Telia bought the former state-owned Finnish operator Sonera, forming TeliaSonera. In July, the Spanish operator Telefonica joined an Italian investor group that purchased a 23.6 percent stake in Telecom Italia. Although the deal was framed to let Italian interests retain control over Telecom Italia, Telefonica now has two representatives on the Telecom Italia management board.

Several state-owned phone operators in Eastern Europe have been sold to West European investors. Deutsche Telekom owns the former state operators of Hungary and Slovakia, and France Telecom owns the former Polish operator.

Besides giving the German operator a strong position in Greece, a purchase of OTE would solidify its presence on the Balkan peninsula, analysts said.

“This would be a very complimentary fit for Deutsche Telekom in the Balkans,” said Kresimir Alic, an analyst for International Data Corp. in Zagreb, Croatia. “Southeastern Europe is one of the last fast-growing mobile markets in Europe.”

In a joint statement Monday, the Greek finance and telecommunications ministries said they “welcomed” the offer by Deutsche Telekom.

Vassilis Kararizos, head of research at Proton Securities in Athens, said he thought the Greek government intended to eventually sell control of OTE to Deutsche Telekom, noting that the German company had agreed to pay euro 26 a share for its initial stake, a 19 percent premium to the average closing price for OTE over the past three months.

Originally published by The New York Times Media Group.

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