ATHENS (Reuters) - Greek telecoms company OTE (OTEr.AT) struck a deal on Friday to sell its Bulgarian unit to Norway's Telenor (TEL.OL) and will use the proceeds to reduce its debt and fight for clients in its recession-hit home market.
OTE, which is controlled by Germany's Deutsche Telekom (DTEGn.DE), said it would receive 717 million euros ($934 million) for its Globul unit, Bulgaria's second-biggest mobile operator with 4.5 million customers. The deal also includes telecoms retailer Germanos Bulgaria, OTE said in a bourse filing.
OTE is selling off assets and cutting costs amid Greece's worst recession since the Second World War.
Following completion of the Globul sale in a few months, OTE will have raised 1.3 billion euros from asset sales since January 2012. Apart from Globul, it has sold its satellite venture, Hellas Sat, and a 20 percent stake in Telekom Serbia.
This has helped slash its debt pile by half, from about 4.3 billion euros in early 2011, making it manageable, OTE Chief Executive Michael Tsamaz said.
"It (the deal) reduces OTE group's debt and ensures long-term sustainability," he said in the filing.
OTE, which has not paid a dividend in two years, faces 1.6 billion euros in maturing debt in 2013-2014.
Falling credit ratings amid fears of a chaotic Greek sovereign default have made it hard and pricey for Greek companies such as OTE to service their bonds and loans.
The company, with a rating of 'B-' from S&P, sold a 700 million euro five-year bond earlier this year at a steep fixed coupon of 7.875 percent.
ASSET SALES, COST CUTS
Apart from asset sales, Tsamaz has been cutting labor costs and investment to offset a slide in revenue, as austerity-pinched customers in Greece and Romania, OTE's two biggest markets, leave the company in droves for cheaper operators.
In January, about 15 percent of the workforce at OTE's Greek fixed-line unit accepted early retirement. The unit had paid overly generous wages from the time it was a state monopoly.
The Globul deal allows OTE to focus on retaining its clients and winning back customers who have left. "Going forward, we can now focus on fully meeting our customers' needs by developing next-generation networks, as well as new products and services," Tsamaz said.
Globul and Germanos accounted for almost 9 percent of OTE's operating profits in 2012. They had earnings before interest, taxes, depreciation and amortization (EBITDA) of 135 million euros on sales of 378 million euros.
The deal values Globul at six times expected 2013 EBITDA, OTE said. The price will be adjusted depending on Globul's net debt and changes in working capital on the day the transaction is completed.
State-controlled Telenor said it bought Globul to create synergies with the other telecoms companies it runs in the neighboring countries of Hungary, Serbia and Montenegro.
"Our entrance into the Bulgarian market enhances the potential for cross-border co-operation and increased efficiency," Kjell-Morten Johnsen, Telenor's executive vice-president and head of European operations, said in a statement.
Telenor's recent efforts have been focused on countries such as Thailand and India; it has also looked at acquiring a license in Myanmar.
Telenor has been among the best performing telecom stocks in Europe. Its shares have risen 28 percent over the past year, outperforming a 4 percent rise in the telecom index .SXKP, as it focused on Asia's fast-growing economies and its stable markets in the Nordics.
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