FRANKFURT/ATHENS Greece on Monday agreed to sell a 10 percent stake in Hellenic Telecom (OTE) to Germany's Deutsche Telekom AG (DTEGn.DE) as the Mediterranean state kicks off privatization deals to cut its debt pile.
The European Union and IMF have been pressing Greece to conduct large-scale privatizations to raise funds for reducing its huge debt.
Cash-strapped Greece has pledged to raise 50 billion euros ($73.2 billion) from privatizations by 2015 and the pre-arranged OTE sale is the first state asset to be shifted as part of the program.
The Greek government exercised its "put" option to sell a 10 percent stake in OTE for around 400 million euros ($585.7 million).
Once the shares have been transferred, the Greek state will hold 10 percent plus one vote in OTE, with Deutsche Telekom owning 40 percent plus one vote.
Greece wants to sell a further 6 percent but Deutsche Telekom is unlikely to buy it, unless the government agrees to scrap working rules that make staff at OTE's Greek fixed-line virtually unsackable.
High labor costs, recession across southeast Europe and tough regulation have caused a profit slide at the company and have forced Deutsche Telekom to write down 900 million euros from its 3.8 billion euro investment.
A Deutsche Telecom spokesman said the ball was now in Greece's court. "If the Greek state wants to sell its stake, we will see if it makes economic sense for us (to buy)," the spokesman said on Monday.
Chief Executive Rene Obermann said last week he was open to buying further OTE shares but all depended on the conditions.
The 10 percent sale will not tighten Deutsche Telekom's grip on the company. Under a 2008 shareholders' agreement, the government's stake has to fall below 10 percent for the state to start losing its extensive veto rights over the company's management.
Since 2008 Deutsche Telekom has amassed a 30 percent stake in southeast Europe's biggest telephone operator to expand its footprint in Greece, Romania, Bulgaria and Albania.
It bought most of the shares for more than 26 euros apiece, a premium of at least 30 percent at the time.
Under the deal, the Greek government had a put option until the end of the year to sell a 10 percent stake in the former monopoly to Deutsche Telekom.
The remaining 50 percent stake is owned by international and Greek institutional shareholders.
OTE and Deutsche Telekom shares barely moved, trading at 7.12 euros in Athens and 10 euros in Frankfurt respectively.
(Reporting by Edward Taylor, Peter Maushagen and Nicola Leske in Frankfurt, with Harry Papachristou in Athens; Editing by David Holmes)