Union opposes Deutsche Telekom’s purchase of stake in OTE

In March 2008, Deutsche Telekom acquired an initial 20% stake in Greece’s OTE telecommunications company and entered negotiations with the government, which is the largest single shareholder in OTE, over a new management and shareholding structure in which Deutsche Telekom would take a major role. This sparked strong opposition, including a series of strikes, from the enterprise-level trade union, fearing changes in industrial relations and the loss of OTE’s ‘Greek’ character. Opposition political parties have criticised the government for allowing Deutsche Telekom to obtain a stake in OTE through an ‘opaque’ procedure via a Greek investment bank.

Background

The largest single shareholder in the Hellenic Telecommunications Organisation (OTE, www.ote.gr), is the Greek state, which owns 28% of OTE shares and manages the company. A Greek investment bank, Marfin Investment Group (MIG), came onto the scene in summer 2007, when it began purchasing OTE shares on the stock exchange, culminating in an announcement that it had acquired a 20% stake in the company.

The government took a negative view of the possibility that MIG would become a principal shareholder in OTE, since the government’s intention was to seek an international telecommunications organisation as a ‘strategic investor’ in the company. Faced with the possibility that MIG, a private investment bank, could become a principal shareholder in OTE by buying up shares, in December 2007 the government passed a law prohibiting investors from acquiring a stake of over 20% in enterprises of strategic significance without government approval.

Deutsche Telekom buys stake

In view of this development, and since the government wanted a telecommunications organisation such as the German-based Deutsche Telekom as a strategic investor and the law prevented MIG from becoming a principal shareholder in OTE, in mid-March 2008 MIG announced the sale of all of its shares to Deutsche Telekom. The government expressed its satisfaction with the development and procedures got under way for the signing of an agreement between the shareholders (the Greek state and Deutsche Telekom), which has to be ratified by Parliament.

The shareholders’ agreement will set out issues relating to management and shareholding structure. The most likely scenario is that the chief executive managing the company will be Greek, and each of the two principal shareholders will hold 25% plus one share in OTE (meaning that the state will sell off another 3% of the shares), so that together the two shareholders own 50% plus two shares, i.e. the absolute majority. Although the government is in favour of a Greek chief executive for OTE, who will therefore be appointed by the government, the possibility that Deutsche Telekom will refuse has led to differences within the government, where figures such as former Economy Minister Georgios Souflias, who designed the ruling New Democracy conservative party’s economic programme, have expressed concerns over the possibility that management will be turned over to the German company.

Opposition from unions and opposition parties

The OTE Employees’ Federation (OME-OTE, www.ome-ote.gr), expressed strong opposition to the possibility that the state may cease to be the largest single OTE shareholder, and has held a series of strikes, accusing OTE management and the government of planning the acquisition by Deutsche Telekom. This, they feel, has given rise to a risk, for the workers, that a company of strategic importance will be fully privatised and lose its ‘Greek’ character, and will also entail an upheaval in labour relations. OTE management took legal action and had the strikes declared illegal. Nevertheless, OME-OTE has continued the strikes. No serious problems have arisen so far in telecommunications operation.

The opposition political parties have been critical of the government, which they hold responsible for the manner in which Deutsche Telekom became a stakeholder in OTE. They have accused the government of playing the part of ‘mediator’ between Deutsche Telekom and MIG, so that ultimately MIG reaped a huge amount from the transfer of its shares, which it transferred to Deutsche Telekom with no opposition from the government. The chair of the main opposition party, the Panhellenic Socialist Movement (PASOK, www.pasok.gr), which was in power when OTE was partially privatised, said in Parliament that if his party comes to power it will redefine the terms for stake acquisition by strategic investors in OTE. All the opposition parties have expressed support for the position of the OTE employees.

In an interview, the Chair of the Hellenic Federation of Enterprises (SEV) employer organisation indirectly expressed a positive view of recent developments, stating a belief that they will boost competitiveness and improve the services that OTE provides to citizens.

Commentary

The acquisition of a stake in OTE by a strategic investor is the practical implementation of one of the government’s announcements before the general election in September 2007. However, even the trade union faction that supports the governing party has criticised the way that Deutsche Telekom acquired its stake in OTE, giving rise to the argument that the government’s position indirectly benefited private interests. The OTE employees’ strikes are essentially a warning to the management in its new composition not to go forward with changes that would bring about major changes in labour relations. It appears that, during the first period of changes in OTE’s management and shareholding at least, more general industrial relations issues will receive less attention.

Stathis Tikos, INE/GSEE