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Greece’s OTE May Receive German Help to Pare $6 Billion Debt

Hellenic Telecommunications Organization SA (HTO), Greece’s largest phone operator, may get help from parent Deutsche Telekom AG (DTE) as it tries to ensure it can repay 4.9 billion euros ($6 billion) of debt in coming years.

Deutsche Telekom may aid the unit, also known by its Greek initials OTE, by taking over its Bulgarian business, Chief Financial Officer Timotheus Hoettges said today. It would also lend to OTE should the Greek company struggle to find funds from next year onward, in exchange for collateral and at market conditions, he said.

“Of course we could,” Hoettges said on a conference call when asked whether Bonn-based Deutsche Telekom may buy Globul from OTE. He added that one shouldn’t overstate OTE’s financial troubles. “Asserting that OTE is up to its neck isn’t based on reality and is polemic.”

Deutsche Telekom, which is 32 percent owned by the German government, holds a 40 percent stake in OTE, includes the unit’s earnings in its financial reports and determines its chief executive officer. It has spent 4 billion euros on OTE shares since 2008, and has since written down 2.6 billion euros on their value as economies including Greece and Romania suffered from Europe’s debt crisis.

OTE today reported second-quarter net income that beat analysts’ estimates after the company cut operating expenses. It said economic conditions and regulators mandating lower interconnection prices in most markets will hurt financial performance. Net debt fell 14 percent from a year earlier to 3.55 billion euros, helped by the sale of its stake in Serbia’s former phone monopoly earlier this year.

Bulgarian Assets

The Greek phone company said in June that it is exploring the sale of its Bulgarian assets, including Globul and electronic goods retailer Germanos Telecom Bulgaria. Proceeds from the sale would help cover a refinancing shortfall of 800 million euros to 900 million euros next year, a person familiar with the situation said at the time.

OTE shares have fallen about 90 percent in Athens since Deutsche Telekom began acquiring the stock. They were unchanged at 2.08 euros at the close of trading in Athens, after earlier rising as much as 3.9 percent. The stock has declined 28 percent this year valuing the operator at 1 billion euros.

Hellenic Telecom repaid a 757 million-euro facility due in early September, Chief Financial Officer Babis Mazarakis said in a conference call today.

Financial Plans

“We’re working actively on a range of financial plans and we are in discussions with Greek and international banks,” Mazarakis said. “Despite the challenging environment in the financial markets we believe that we will soon be able to make announcements that will put at ease your concerns about our refinancing needs.”

The company said it has a 900 million-euro revolving credit, 600 million euros of which has been drawn and is due for repayment next year if a one-year extension option isn’t exercised.

OTE’s debt also includes a 1.25 billion-euro bond which matures in August 2013, according to data compiled by Bloomberg.

To contact the reporter on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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