Greece Telecom Sale Not Enough

The Greek government will sell 10%  of the Hellenic Telecommunications Organization, the nation’s telecom company, to Deutsche Telekom of $585 million. That it not much for a country that has $130 billion in loans due to the EU and IMF. The Greek debt burden is higher than that. It has billions more that it will have to refinance after 2013. An anticipated new EU loan deal for Greece could be larger than the first one.

The transaction with Germany’s largest telecom firm may be a bit of revenge for the biggest nation in the EU by GDP. Germany must provide a significant portion of any money which is loaned to Greece. Many voters in Germany are against that.

The trouble with the Greek telecom sale is that it is so modest. The government could have swung some EU anti-bailout sentiment opinion  in its favor if it had announced several sales valued in the billions of dollars. The Hellenic Telecommunications Organization plan shows that Greece will sell assets relatively slowly, even though it has assets which could be sold soon. This could almost immediately include ownership positions in its Post Savings Bank and the State Lottery Tickets businesses.

The citizens of the EU and financiers who hold Greek debt will see the telecom transaction as so small as to be an insult. Other bailed out countries such as Portugal could also be slow to sell government assets. All this will do is convince the capital markets that these countries think they can get better terms by stalling because they feel that the EU is desperate to save the euro. That desperation is not worth counting on. Public opinion and EU treasuries have their limits and current reluctance to re-finance Greece shows that.

Douglas A. McIntyre