Serbia to consolidate Telekom Srbija and hunt for new investor

By bne IntelliNews November 30, 2011

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Greek operator Hellenic Telecommunications Organization (OTE) confirmed on November 29 that it is in talks to sell its 20% stake in former fixed-line monopoly Telekom Srbija back to the Serbian government, Reuters reports. The deal would allow Serbia to consolidate full ownership of the company in order to facilitate a sale to a new investor.

"OTE... is in talks with Telekom Srbija with the aim of disposing its 20% stake in the company," OTE, which is 40% owned by Deutsche Telecom, said in a filing to the Athens bourse. If the sale goes through, it could help OTE in its battles against the problems in its home market. It would also cheer its German investor, which has seen losses of around €1bn to date from its investment in OTE.

OTE CFO Kevin Copp said on November 16 that the Greek company is taking precautionary measures just in case Greece leaves the Eurozone, including selling assets to increase liquidity. "Everything we can do to protect to our cash deposits we have done," he said, according to the Wall Street Journal.

Meanwhile, gaining full control over Telekom Srbija would help Belgrade push ahead with long-delayed plans to find a new investor. Economy Minister Nebojsa Ciric stressed earlier this month that his country will benefit from consolidating its stake.

OTE acquired the 20% stake in 1997, but has not been able to do much with it because Serbia balked for years at giving up management control or reducing its remaining 80% stake. However, with the government declaring last year that it's finally ready to sell, OTE's holding - which it is no longer in a position to increase - has complicated the process.

In May, Belgrade rejected a €1.1bn offer from Telekom Austria for a 51% stake, with Serbia holding out for €1.4bn. The failure of the sale - in which the Austrians were the sole bidder - forced Serbia to raise more debt than planned for this year's budget. However, protes"unconditional minimum price."

Meanwhile, the Serbian government is also preparing to distribute part of its holding to employees and the public - which have demanded that Telekom Srbija remain majority owned by the state - Ciric confirmed earlier this month, saying that technical work for the handout will soon be complete. The deal will see 15% of the company's shares being distributed to around 4.8m Serbian citizens. Existing and former staff are set to receive 6.5% of the shares. The government has said it plans to list the remaining shares in Belgrade, but reports on this part of the plan appear to have gone quiet.

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