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Greek telecommunications company OTE has obligations to foreign creditors exceeding 3.4 billion euro

20 January 2012 / 15:01:08  GRReporter
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It seems that the Greek telecommunications company OTE, which is the owner of the mobile operator Cosmote, is strugglingto survive. The largest telecommunications company in South Eastern Europe has accumulated a medium-term debt of 3.4 billion euro and the company's management is faced with the challenge of reducing it fast in order to avoid bankruptcy. The executive manager of OTE Michalis Tsamaz defined the current developments in the Greek economy as sandstorms. The future is not clear in it yet and the only safe strategy is to reduce, if not to zero the corporate debt. He stated that this will happen through the introduction of a recovery programme supervised by the National Communications and Telecommunications Commission.

Tsamaz explained that Deutsche Telekom - the largest shareholder after the state,  will not take part in the recovery process by paying to refinance corporate obligations because it is seriously scared of the scale of the economic crisis and is not willing to take risks. He stressed that any investor would like the situation in Greece to stabilize in order to make decisions.
    
In this situation, the only option remains for the management to redirect its internal policies to slow down the decrease in revenue and optimize the losses in their balance sheets more effectively. The level of wage cost as an item in the budget remains high and it seems that the company will try to make more serious cuts this year. In 2010, wage costs reached 760 million euro. This amount corresponds to 38.5% of revenue and 52% of expenditure. The executive manager stressed that these rates hold on average 21% of expenditure and 23% of revenue in companies similar to OTE in other European countries. From this perspective, Tsamaz said that the management will not hesitate to eliminate the 13th and 14th salary of employees, if the decision concerning their payment is legalized.

 In 2011, the company seriously cut the operational costs and took care to improve cash flow. Furthermore, the "bad customers" increased by 30% and unpaid bills reached 120 million euro compared to 2009, when this amount was 77 million. The tax burden on telecommunications services also increased and it is the highest in comparison to other European Union countries. 26.4% of the end price consumers pay in taxes.

The company has total duties to the amount of 5 billion euro, of which 3.4 billion euro must be repaid by February 2014. 640 million euro are to be paid in 2012, 2.1 billion are the obligations to foreign lenders with maturity in 2013 and another 500 million are to be paid in April 2014. The executive manager of the Greek telecommunications giant admited that the company is not able to meet the coming obligations and it will not get away with a partial loan to cover its debts. The biggest concern is whether banks will finally "open the tap" to finance enterprises or if stagnation will continue. In particular, the company needs 700 million euro inb additional funding.

"After six months, we will reassess the values and the investment plan by taking into account the environment. OTE invests 500 million euro each year, it has operating costs of 1.5 billion euro and other costs amounting to 700-800 million euro. There will be other activities before taking (extreme) measures," said Tsamaz. He stresses that so far, the company has good cash flow, having in mind the sale of TELEKOM SERBIA and the satellite HELLASAT.

Tsamaz said that it is difficult to make any forecast for 2012. He notes that the year may be filled with unexpected events and thinks that market fragmentation will occur, which is not healthy and can seriously harm the economy. Regarding competition, he said, "Our competitors are at a standstill. They have no money to expand their network and insist that OTE should reduce investment in development." He talked about a possible "price war" in telecommunications, which will show who is the stronger player.

Tags: EconomyCompaniesOTELoansObligationsEconomic crisis
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