Romtelecom

Romania, OTE to sign Romtelecom deal  

Greek operator gains majority stake in Romtelecom in US$243m deal.  
 
Major elements have been agreed in a $243 million deal giving Greek telecoms operator OTE a majority stake in fixed-line operator Romtelecom and a free hand to restructure it, Romania said on Tuesday.

After months of negotiations on raising OTE's stake in Romtelecom to 54 percent from the present 35 percent, the deal should be signed next week allowing the launch of much-needed reforms at the troubled company.

"We agreed on all major points of the deal. We are now discussing last minute details ... I can't see any further problems so we will sign the accord next week," Radu Cernov, a general secretary at the Communications Ministry, told Reuters.

An Athens-based analyst said the market was eager for details of the deal.

"It's not the fact that they will sign that is so important," said Costas Karagiorgos, telecoms analyst at EFG Eurobank Securities. "What we don't know and want to know is the terms and conditions of the deal as well as guarantees that will give OTE full control of the company's environment."

LOCKED IN TALKS

Romania and OTE have been locked in talks about how to inject funds into the cash-strapped company and have argued over regulatory complications related to low interconnection rates which came into effect on January 1 after Romania deregulated its telecoms market.

Cernov said the Communications Ministry, the majority shareholder in Romtelecom, had removed a major stumbling block in the negotiations by agreeing to give up its golden share in Romtelecom, which gave the state veto rights over any strategic moves by the company.

In an addendum to the deal, the two sides agreed to replace the golden share with a new accord stipulating the rights of the ministry as a minority shareholder, Cernov said.

The golden share was part of a 1998 selloff contract, when OTE paid $675 million for a 35 percent stake in Romtelecom. But Romania failed to deliver on promises of growth for Romtelecom and the company is now facing financial troubles.

Last month, OTE Vice President George Skarpelis said OTE planned to slash some 4,000 jobs at Romtelecom, part of a restructuring programme which also includes tariff reductions.

Romania hopes to join the EU in 2007 and the decision on the golden share was also in line with a ruling of the European Court of Justice that asked for golden shares to be scrapped as they restrict free movement of capital, Cernov said.

Last month, the Romanian parliament's upper house, the Senate, lifted a legal hurdle by passing a bill allowing OTE to raise its stake in Romtelecom.

Cernov said he expected President Ion Iliescu to endorse the bill by the end of this week.

"There are no legal obstacles any more," Cernov said.

2002 Reuters Limited  

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