Ten thousand job cuts by yearend. Significant increases in tariffs for local calls. Freezing all investments.
This is the shock plan that OTE International came up with to solve the problems of cash-strapped RomTelecom. However, the plan will not be enforced immediately, Panagiotis Kargados, the general manager of the national telecom operator hinted yesterday.
Explanation: the Romanian Government has agreed to a capital increase. But the going is only beginning to get tough. A delegation comprised of high-ranking OTE officials will start again negotiations with the Romanian State today in Bucharest. The company's shareholding structure is at stake.
Two days before the Romanian government said it had agreed to a $200m capital increase for RomTelecom, the Financial Times ran a story titled "OTE to shake up RomTelecom," describing the tough restructuring plan quoted above. The restructuring planned by OTE had been agreed with the European Bank for Reconstruction and Development (EBRD), the main creditor of the Romanian telecom operator. According to FT, RomTelecom is still meeting payments of interest and principal on a $130m loan from the EBRD. However, the Romanian company also owes about $200m to equipment suppliers, including Greece's Intracom group, Germany-based Siemens and French Alcatel. And debts don't stop here.
"This decision (i.e. the restructuring plan disclosed by FT) was made by the Board before the Romanian Government decided on the share capital increase at RomTelecom and considering the serious financial difficulties RomTelecom is up against," the company's general manager Panagiotis Kargados told Ziarul Financiar.
"Certainly, if negotiations have a positive outcome, this decision may be revised," Kargados stated.
Even if it is little likely for RomTelecom to operate the biggest layoff among Romanian companies since 1989 (10,000 out of 32,000 employees in a short period of time), the management strategy will certainly be changed. According to market sources, last week's visit to Bucharest by the OTE chairman himself, Lefteris Antonakopoulos, was triggered by the unrelenting pressure upon OTE, coming from investors and lenders. OTE, listed on the NYSE and the Athens Stock Exchange, has lost almost 36% of its stock value this year, and RomTelecom has something to do with it. OTE investors are beginning to distrust RomTelecom, which posted losses in Q1 and profit only in the Q2. Even if it owns 35% of capital, which gives it the right to vote in the Board and a 51% usufruct right, OTE wants to handle the management of RomTelecom by itself. It could accomplish this by obtaining the main stake in the company.
However, the Ministry of Communications and IT (MCTI) deemed as "premature" the rumours about OTE getting control over RomTelecom, "as the talks between the two parties are still unfolding."
