Cosmorom has become even more of a headache for the Greeks at OTE yesterday, when Standard&Poor's said it placed its 'A' long-term corporate credit rating on the Greece-based telecommunications services provider on CreditWatch with negative implications.
The rating actions came after mobile telephony operator Cosmorom failed to repay a $117 million loan. OTE's reply was swift: the company is not willing to take money from its shareholders or to contract a credit in order to pay the debts of RomTelecom's mobile division.#leadend#
The decision of Standard&Poor's is rather unpleasant for OTE, as the company enjoys some of the best ratings of European telecoms. The group was wise enough not to participate in the multi-billion adventure called 3G, which has brought ruin upon many companies.
The Greek group, which holds the main stake in RomTelecom, has said it has "no legal obligations and does not wish to grant financing to Cosmorom, either." The group's reaction came as a surprise, since OTE officials had repeatedly talked about $500m investments in the mobile telephony division in the past few months. This kind of talk prompted the plunge of OTE shares on the stock exchange, but OTE went as far as to mandate Deutsche Bank to identify the best ways to help the group's mobile division exceed its meagre 1-2% market share in Romania.
OTE International managing director Lefteris Antonakopoulos in March presented three relaunch options for Romania: acquisition of an operator, establishment of a joint-venture with a competing company, establishment of a virtual mobile network operator based on an existing service (which could trigger the sale of Cosmorom), or infusion of fresh capital into Cosmorom.
According to sources close to the Greek group, officials of RomTelecom - OTE shareholders and representatives of the Ministry of Communications and Information Technology (acting on behalf of the Romanian State) will meet in the next few days, most likely in Bucharest, to decide the future of Cosmorom.
At any rate, OTE's plans can no longer applied, given the statements of Standard&Poor's. Cosmorom's failure to pay its $117m debt, generated by the acquisition of equipment from Greek company Intracom also makes it difficult for OTE to easily contract loans.
According to the Financial Times, quoted by Mediafax, the situation at Cosmorom has activated a cross default clause in OTE's guaranteed bond indenture (worth 1.1bn euros and due in 2007) and its senior loan facility, worth one billion dollars and related to the Greek group's increased stake in RomTelecom.
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