Greek Government, Deutsche Tel to Take Equal Stakes in OTE

ATHENS -(Dow Jones)- The Greek government and Deutsche Telekom are close to a deal under which they would share equal ownership and management control of Greece's largest telephone company, a senior official said Wednesday.

Under the outlines of the deal, the government and Deutsche Telekom would each control 25% plus one share in Hellenic Telecommunications Organization (OTE), a senior official at Greece's finance ministry said.

By mutual consent, the two sides would jointly appoint the company's most senior executives, with Deutsche Telekom naming the chief executive officer of OTE, and the Greek state naming the chairman of the company.

"We are looking for a balanced arrangement, both in terms of share ownership and management control, so essentially we want to go with a 50:50 type of arrangement," the official said.

"Jointly the Greek state and Deutsche Telekom will have a majority of 50% plus two shares," the official added. "DT will suggest the CEO, and the Greek state will suggest the chairman of the board, but both will have to have the agreement of the other side."

Last month, Deutsche Telekom announced the acquisition of a 20% stake in OTE, Greece's former monopoly telecoms operator, for about EUR2.5 billion, from Marfin Investment Group Holdings.

Since then, it has been in talks with the Greek government - including several rounds of negotiations Wednesday - to discuss raising its stake in OTE further. The Greek government is the largest shareholder in OTE with just over 28%.

A deal is expected within the next few days, although the official said a formal announcement may not come until next week, or even the week thereafter, pending approval from both Greece's privatization committee and DT's board of directors.

Although both sides will control equal shares of OTE - and combined, a majority in the company - the deal is widely seen as preparing the way for Deutsche Telekom to eventually take control of OTE at some point in the future.

Indeed, the agreement already envisions an options clause that will allow DT to raise its stake by roughly another 5% in the short term.

"There will be other clauses in the agreement, such as if (DT) wants to buy, we will have a put option," said the official. "The agreement will be such that it will allow, under certain conditions, for Deutsche Telekom to buy more shares, even a majority of the company, if the Greek government doesn't object."

Deutsche Telekom has long coveted access to the fast growing Balkan markets to spur future growth for the company, something which OTE offers. Through both its fixed-line investments and through its mobile subsidiary Cosmote, OTE has carved out a strong niche in markets ranging from Romania to Greece.

For OTE, the Greek government argues that the presence of Deutsche Telekom as a strategic partner will ensure its future growth and development - as well as shield it from the political pressures of the past and predatory takeover in the future.

"This deal is essentially about securing the future of OTE," said the official. "For telecoms in Greece that is very, very important. For OTE's future investments in the Balkans it is important. It will give some competitive advantages to OTE."

-By Alkman Granitsas, Dow Jones Newswires; +30 210 331 2881; alkman.granitsas@dowjones.com

(Archibald Preuschat in Frankfurt contributed to this story.)

(END) Dow Jones Newswires

Posted to the site on 9th April 2008