OTE proposes to merge Romtelecom and Cosmote Romania

OTE, the Greek telecommunication holding, made a proposition to the Romanian government to merge fixed-line telephony operator Romtelecom with Cosmote, according to a press release published by the Romanian Ministry of Communications and Information Society (MCSI). OTE also declined to buy the government's 45.99% stake in Romtelecom because of the difficult economic situation in Greece and its financial strategy to reduce its exposure to debt. The group may reconsider buying the stake if circumstances change, however.

OTE believes that the merger of Romtelecom and Cosmote will create synergy on the market through offering tariffs that are more attractive to users and will generate better profit.

Last month, the Romanian government met with representatives of OTE and Deutsche Telekom for talks related to the sale of the 46% stake in Romtelecom, the biggest Romanian fixed-line telephony operator in terms of revenue. The government previously announced the decision to privatise the remaining state held stake in the operator in November 2010, and looked to receive €1bn for it. The government’s objective is to receive cash from the sale of the stake, with one of the possible options being to list the company on the Romanian Stock Exchange.

OTE currently has a 54.01% stake in Romtelecom and a 70% stake in Cosmote Romania, with Romtelecom holding the remaining 30% in Cosmote, the third mobile telephony provider in the country by number of subscribers. Meanwhile, Deutsche Telekom has a 30% stake in OTE.

The combined revenues of Romtelecom and Cosmote Romania in 2010 totalled about €1.19bn. At the end of March 2011, Romtelecom had about 4.69 million fixed-line telephony, broadband internet and CaTV subscribers, while Cosmote had about 6.64 million mobile telephony clients.

Cross-country comparison:

A similar transaction was carried out six years ago in Poland by France Telecom. TP SA had to buy a 34% stake in PTK Centertel (Orange) from France Telecom (its parent company) for the corresponding fee of PLN 4.9bn (€1.24bn). In effect, TP SA has a 100% stake in PTK Centertel, but the stakeholder of both entities is France Telecom. In practice, it is simply a cash transfer.