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Deutsche Telekom Said in Talks to Buy Greece’s OTE Stake

Deutsche Telekom AG (DTE) offered to acquire the remaining 10 percent holding in Hellenic Telecommunications Organization SA (HTO) held by the Greek government, according to two people familiar with the matter.

The German carrier owns 40 percent of Greece’s largest phone company, also known as OTE, and consolidates it under a 2008 shareholder agreement. A price hasn’t been agreed on, said the people, who asked not to be identified because the talks are private. OTE shares jumped 3.1 percent to 10.80 euros in Athens, valuing the stake at 530 million euros ($715 million).

The bid underlines OTE’s increasingly important role in Deutsche Telekom’s eastern European strategy. After spending about 4 billion euros to accumulate OTE shares -- and subsequently recording writedowns of 2.6 billion euros as the stock plummeted -- Deutsche Telekom is responding to a push by European carriers to offer combined fixed, mobile and Internet services. For Greece, a sale would take advantage of OTE’s share price, which has jumped more than nine-fold from a record low in June 2012.

“Let’s work together to develop Deutsche Telekom, our group, into the leading telecommunications provider in Europe with OTE as a strong cornerstone,” Deutsche Telekom CEO Timotheus Hoettges told employees at OTE’s headquarters yesterday, according to a company statement. Hoettges, in his current role for a month, also met with Greek Prime Minister Antonis Samaras in Athens.

Photographer: Kostas Tsironis/Bloomberg

The logo of OTE, the Hellenic Telecommunications Organisation SA, sits in the side of a public pay phone in Athens. Close

The logo of OTE, the Hellenic Telecommunications Organisation SA, sits in the side of a... Read More

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Photographer: Kostas Tsironis/Bloomberg

The logo of OTE, the Hellenic Telecommunications Organisation SA, sits in the side of a public pay phone in Athens.

Network Investments

A spokesman for Bonn-based Deutsche Telekom declined to comment on any offer for OTE. A representative for the Hellenic Republic Asset Development Fund, the finance ministry agency responsible for privatizations, wasn’t available for comment.

Deutsche Telekom fell 1.6 percent to close at 12 euros on the Frankfurt exchange, giving Germany’s biggest phone company a market value of 53.4 billion euros.

Under CEO Michael Tsamaz, OTE has sold assets to refinance debt and eliminated jobs. The carrier, with units in Romania and Albania, has announced 1.2 billion euros of network investments over four years to compete with Vodafone Group Plc (VOD)’s Greek unit and Wind Hellas Telecommunications SA.

Greece’s asset-sale fund secured 4 billion euros in deals in 2013, and collected 2.6 billion euros of that amount, aiming to collect 3.6 billion euros this year, its CEO, Ioannis Emiris, said in a December interview.

Opap Sale

In October, the country completed the sale of a 33 percent stake in gambling company Opap SA for 622 million euros.

While Greece had agreed with its creditors from the European Commission, the International Monetary Fund and the European Central Bank to raise 50 billion euros by 2015 through asset sales, as part of its 240 billion-euro bailout, officials had to scale back their plans as transactions were delayed.

The nation failed to secure any bids for gas company Depa SA in June. The tender will have to be “re-launched as soon as possible,” the IMF said in a report the following month.

Greece’s 2013 primary budget surplus was more than 1 billion euros, Samaras told his party’s lawmakers in a speech yesterday. The government’s 2014 budget estimated that it had achieved a surplus of 812 million euros last year, a year before the government was scheduled to achieve a surplus under the terms of its bailout program.

Last Valuation

The last block transaction on OTE -- in 2011 when the Greek government sold a 10 percent holding via a put option to Deutsche Telekom -- valued the stake at about 400 million euros.

OTE raised more than 1.3 billion euros over the last three years selling a stake in Telekom Srbija AD, its Hellas Sat satellite division and its Bulgarian wireless unit. Staff costs at the Greek fixed-line business dropped 17 percent in the first nine months of 2013 from the year-earlier period, helped by voluntary departure programs.

OTE’s 700 million euros of 7.875 percent bonds issued last year climbed 2.37 cents on the euro to a record of 114.82 cents, the biggest jump since June 26, according to Bloomberg bond prices.

Tsamaz was named today to the board of directors at EE, Deutsche Telekom’s U.K. wireless venture with Orange SA. (ORA) He is set to replace Claudia Nemat in that function as of Feb. 1, the German carrier said.

To contact the reporters on this story: Nikos Chrysoloras in Athens at nchrysoloras@bloomberg.net; Cornelius Rahn in Berlin at crahn2@bloomberg.net; Eleni Chrepa in Athens at echrepa@bloomberg.net

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

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