2008/722/EC: Commission Decision of 10 May 2007 on State aid C 2/06 (ex N 405/05) which Greece is planning to implement for the early voluntary retirement scheme of OTE (notified under document number C(2007) 1436) (Text with EEA relevance)
Date: 2008-05-10
Institutions: European Commission
Subjects: Greece, State aid, aid to undertakings, control of State aid, early retirement, pension scheme, telecommunications industry

11.9.2008

EN

Official Journal of the European Union

L 243/7

(Acts adopted under the EC Treaty/Euratom Treaty whose publication is not obligatory)

II

DECISIONS

COMMISSION

COMMISSION DECISION

of 10 May 2007

on State aid C 2/06 (ex N 405/05) which Greece is planning to implement for the early voluntary
retirement scheme of OTE

(notified under document number C(2007) 1436)

(Only the Greek version is authentic)

(Text with EEA relevance)

(2008/722/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty
Community,
and in particular
Article 88(2) thereof,

establishing the European
subparagraph of
the

first

Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments
to those provisions (1) and having regard to their
pursuant
comments,

Whereas:

(1)

(2)

I. PROCEDURE

By letter registered on 11 August 2005, the Greek au-
thorities notified the planned financial contribution of
early voluntary retirement
the Greek State
its
scheme offered by OTE to certain categories of
employees.

to the

the Commission
By letter of 23 September 2005,
requested additional
information in relation to the
notified measure. After having requested and been
the Greek authorities submitted
granted an extension,

by

information

further
the
Commission on 9 November 2005. On 22 December
2005, the Greek authorities complemented their above-
mentioned reply with additional information.

registered

letter

by

(3)

(4)

(5)

(6)

the Commission
By letter dated 8 February 2006,
informed Greece that
it had decided to initiate the
procedure laid down in Article 88(2) of the EC Treaty
in respect of
the measure in question and asked for
information to be provided on a number of issues.

The Commission decision to initiate the procedure was
published in the Official Journal of the European Union (2).
The Commission called on interested parties to submit
their comments.

On 3 May 2006, Greece submitted its comments and the
information requested by the abovementioned decision.
Further information was submitted on 14 July 2006,
2 August 2006, and 3, 5, 6 and 9 October 2006.

On 31 July 2006, the Commission received comments
from one interested party that solicited anonymity and
forwarded them to Greece, which was given the oppor­
tunity to react.

(1) OJ C 151, 29.6.2006, p. 2.

(2) Idem.

L 243/8

EN

Official Journal of the European Union

11.9.2008

(7)

On 18 October 2006, Greece submitted its reply to the
comments submitted by the above mentioned interested
party. With the consent of Greece,
the Commission
forwarded the said reply to the interested party.

(11)

(8)

(9)

(10)

II. DETAILED DESCRIPTION OF THE AID

1. The recipient

The Hellenic Telecommunications Organisation (OTE)
was founded in 1949 and is a public limited company
listed on the Athens Stock Exchange and on the stock
exchanges of New York (NYSE) and London (LSE).

including local,

Until full liberalisation of the Greek telecommunications
market on 1 January 2001, OTE was the sole provider of
fixed voice services and telecommunications networks in
long-distance and international
Greece,
in
communications
almost all segments of the broader electronic communi­
cations market
Internet, maritime and
satellite communications) both as a network operator
and as a service provider.

services. Today, OTE is present

(fixed, mobile,

Following full
liberalisation in January 2001 and the
ensuing market entry by alternative electronic communi­
cations operators, OTE’s market share for (fixed) voice
calls gradually dropped from 94 % in 2002 to 73 % at
the end of 2005 (3). Likewise, the fall in market share as
well as wider technological
trends, such as fixed-to-
in OTE’s
mobile substitution, have also led to a fall
fixed revenues from around EUR 3,4 billion in 2001
to around EUR 2,6 billion in 2005. The decline in
revenues has not been matched by a fall
in operating
costs
company recorded a net
operating loss for the first time in its history. Despite
this, OTE remains today the leading operator in the
fixed voice services and enjoys a quasi-
provision of
monopolistic position as
the only access network
provider in the fixed market (4).

and in 2004 the

(3) See OTE Annual report 2005, at http://www.ote.gr/english/
investorrelations/Files/OteAnnualReport05English_Final.pdf

(4) According to the latest Commission Implementation Report,

‘in
September 2005 there were 24 authorised public fixed voice
telephony operators of which 13 were commercially offering fixed
voice telephony services over a leased or own network. These
include the incumbent but do not
include operators acting as
resellers or suppliers of prepaid services. Although the incumbent
is still strong in the fixed calls market,
there has been some
significant progress towards more competition, reflected in the fact
that the incumbent’s retail revenues market share fell from 85 % in
December 2003 to 76 % in December 2004, while there were three
additional operators, which, together with the incumbent, accounted
for 90 % of the market’: see the Annex to the Communication from
the
the Commission to the Council,
European Economic and Social Committee and the Committee of
‘European Electronic Communications Regulation and
the Regions,
Markets 2005’
(11th Report) COM(2006) 68 final, at p. 120,
http://ec.europa.eu/information_society/policy/ecomm/doc/
implementation_enforcement/annualreports/11threport/sec_2006
_193-vol1.pdf

the European Parliament,

State held 38 % of

In Greece, the liberalisation of the electronic communi­
cations market on 1 January 2001 was not accompanied
the time of the
by the full privatisation of OTE. At
notification,
the
the Greek
company’s
share capital, with the remaining capital
being held by Greek institutional investors (12 %), inter­
national investors (29 %), Hellenic Exchangeable Finance
S.C.A. (11 %) and the public at large (10 %). In August
2005, through a convertible bonds transaction, Hellenic
Exchangeable Finance sold its 11 % participation in OTE
to the Greek State. On 7 September 2005, the Greek
State sold a 10 % stake in OTE, reducing its participation
in OTE to 38,7 %.

(12) However, despite the full liberalisation of the market and
its partial privatisation, OTE remains subject to the laws
and trade union agreements adopted before liberalisation.
As a result, the legal framework applicable to OTE shows
several particularities as compared to the ordinary law
applicable to its competitors.
(a) OTE
employees enjoy a de facto permanent status (5), and (b)
OTE faces
costs, namely higher
labour
employer and employee social security contributions,
and
higher
increased compensation payments in case of retirement.
The main aspects of
law arrangements
applicable to OTE are set out in recitals 13 to 18.

In particular,

the labour

employees

additional

qualified

salaries

less

for

(13)

2. Labour law arrangements applicable to OTE

To date, OTE remains subject to a number of specific
laws and ‘collective employment agreements’ that were
adopted before liberalisation in 2001 and which depart
from the current labour legislation applicable to other
public limited companies in Greece. In particular, OTE’s
obligations towards its employees are governed by (a)
employment
Greek employment
(b)
agreements negotiated between OTE and the employees’
union (OME-OTE), mainly before the market was libe-
ralized, and (c) OTE’s general employment statute (‘GES’).

collective

law,

(14)

The labour legislation applicable to OTE exhibits several
particularities as compared to the ordinary rules.

(5) The job security that OTE employees enjoy as a result of their
permanent status derives from Article 2(2)(b) of Law No 2257/94,
which ratifies OTE’s general employment statute. According to
Articles 2 and 17 of the statute, OTE cannot unilaterally terminate
an employment contract. This implies that OTE cannot
freely
operate in the market by deciding which employees must leave or
by forcing them unilaterally to leave after offering them legal
compensation in return.

11.9.2008

EN

Official Journal of the European Union

L 243/9

(15)

(16)

(17)

(18)

First, all its employees enjoy a de facto quasi permanent
status. Articles 2 and 17 of the GES provide that OTE
cannot unilaterally terminate an employment contract in
order to reduce its workforce. According to Greek Law
No 2257/1994, the provisions of OTE’s GES have the
same binding effect as any other Greek law. As a result,
the labour status of OTE employees cannot be modified
without the latter’s consent and the passing of legislation
giving effect thereto.

rates

fixed under

Second, OTE has to pay social security contributions for
employees hired before 31 December 1992 (6) at rates
which exceed the
the generally
applicable social and labour laws. For OTE, employer
and employee contributions amount to 25 % and 11 %
respectively, whereas contributions in the private sector
amount only to 13,33 % and 6,67 % respectively. For
employees
social
security contributions are similar to those in the private
sector.

taken on after 1 January 1993,

Third, the current GES prohibits salary increases based on
considerations other than an employee’s formal qualifi­
cations and seniority in the company. OTE cannot
therefore increase salaries based on employee produc­
tivity and/or
achievements. On the basis of past
agreements with the trade unions, new recruits enjoy
compared to the private
higher
sector, while experienced employees
in management
posts receive lower salaries.

entry-level

salaries

Finally, according to the applicable legal framework, OTE
has to make higher lump-sum payments for retirees.
receive two lump
Upon retirement, OTE employees
sums: (a) a lump sum imposed by the law, equivalent
to 11,6 times the last gross monthly salary, and (b) a
lump sum negotiated by OTE and the unions not
exceeding EUR 20 100, plus 9 gross monthly salary
payments (compared to 9,6 salary payments in the case
of private firms).

3. Retirement scheme

(19) OTE employees are obliged to retire when (a)

they
complete 35 years of
full service or (b) when they
complete 30 years of full service, and reach the age of
58 years, or (c) when they reach the age of 62 years and
fulfil
the law,
namely 15 years or 4 500 days of work. Those who
are entitled to a pension but have not reached the age
for mandatory retirement can continue to work until
they do so.

the minimum years of service under

(6) This category of employees accounts for 84 % of the company’s

workforce.

(20) Upon retirement, OTE employees are entitled to a
pension in accordance with the conditions set out in
the Greek social security legislation that applies to a
series of special pension funds, including OTE’s pension
fund. This means that OTE employees are entitled to a
full pension, that is to say 80 % of their final salary. Their
main pension is paid by the public-law Insurance Fund
for OTE Employees (TAP-OTE) (7). An auxiliary public
‘OTE
law insurance
Assistance Fund’ further provides a maximum auxiliary
pension of 20 % of the final salary. Both the general
pension (80 %) and the auxiliary pension (20 %) are
incorporated into law and thus mandatory for OTE.

scheme which manages

the

4. The restructuring of OTE and the VRS

(21)

Based on a study carried out by the McKinsey consulting
firm and in order to ensure the long-term viability of the
company, OTE adopted a package of
restructuring
measures in May 2004, the key element of which is
the voluntary retirement scheme (VRS). With the VRS,
OTE aims to reduce its permanent staff and be in a
position to recruit new qualified staff
that will no
longer enjoy permanent status.

(22) OTE currently employs around 16 000 people enjoying
guaranteed employment. The McKinsey study indicated
that OTE could operate and offer the same kind of
services with approximately 30 % fewer employees.
In
addition,
the study highlighted the need to recruit
qualified staff capable of dealing with IT, new tech­
nologies, marketing sales, finance and regulatory issues.
The average age of OTE’s staff (47 years) and the fact that
only a small percentage of the current workforce (19 %)
holds a university or college diploma further compound
OTE’s labour inflexibility.

according to the Greek authorities,

(23) An abolition of the permanent status of existing OTE
staff — which could have enabled OTE to reduce its
workforce like any other company — would have
given rise,
to
serious legal constitutional concerns and was therefore
discarded as an unrealistic option. Given the permanent
status of OTE’s employees as currently enshrined in legis­
lation, a reduction in the workforce was possible only
with the consent of the employees’ trade union (OME-
OTE). In this respect, a VRS was first agreed between

(7) The main pension fund for OTE employees is TAP-OTE. TAP-OTE is
an independent legal body governed by public law,
like all other
pension funds in Greece. It has its own board of directors, adminis­
tration, budget and finance departments.
It covers both OTE
employees and employees of other companies. It is divided into a
pension division and a health division. Besides TAP-OTE, there is
also an auxiliary fund. The OTE auxiliary fund has two schemes, the
assistance
scheme. OTE
employees are entitled to a pension under Greek social security
legislation, which applies to all public law funds such as TAP-
OTE. Both the main and the auxiliary pensions are obligatory
under Greek law.

auxiliary insurance

and the

scheme

L 243/10

EN

Official Journal of the European Union

11.9.2008

(24)

(25)

OTE and the company’s trade union in February 2005,
conditional upon the Government passing legislation
giving it binding effect.
In May 2005, OTE also
concluded a collateral collective employment agreement
with the trade union whereby any new recruits would no
longer benefit from the permanent status.

The relevant legislation was passed on 14 July 2005 (Law
No 3371/2005) and the VRS agreement between OTE
and the trade union was finalized on 20 July 2005. This
provided the legal framework which OTE needed in order
to offer early retirement to around 6 000 people while at
the same time being able to take on new staff (around
1 200 people) subject to the ordinary labour laws (i.e.
with no permanent status).

The right to early retirement was given to employees
who by 2012 will have
reached the mandatory
retirement age, namely the age of 58 and 30 years of
service, or 35 full years of service, or the age of 62 years
and 15 years of service. The remaining years of service
(‘notional years’) of employees opting for early retirement
would be recognised and these employees would be
entitled to immediate pension payments. The recognition
of a maximum of eight notional years of employment is
the basis for the calculation of the main and auxiliary
pensions as well as
the two lump-sum retirement
payments, one from OTE and one from the auxiliary
fund.

(26) Other employees who are close to retirement and already
fulfil
the general requirements for full pension rights
would be entitled to only one lump-sum payment of
between EUR 5 000 and EUR 30 000 (8).

(27) According to the Greek authorities, the conditions of the
current VRS had to be more generous than similar early
retirement measures in the past
to ensure
maximum take-up by employees (9).

in order

5. Legal framework for the VRS and its financing

(28) On 14 July 2005,

following the conclusion of

the
agreement between OTE and the trade unions on the
implementation of
the Greek Parliament
adopted Law No 3371/2005. Article 74 of that Law
gives the necessary legal effect
to the VRS and lays
down the State’s financial contribution to the scheme.

the VRS,

(29)

(30)

(31)

In particular, Article 74 of the Law gives permanent OTE
reaching the statutory retirement age by
employees
31 December 2012 the possibility of
requesting
immediate discharge while receiving the pension they
would have received if they remained with OTE until
that date. For that purpose, the employees are granted
recognition of as much notional employment time as
to both the main and the
necessary, with regards
the employees
auxiliary pension. Following discharge,
the pension
are entitled to immediate payment of
calculated in this way.

The expenditure arising from the recognition of notional
employment time in respect of the total pension contri­
butions of the employees and of the employer, as well as
the expenditure arising from the pensions which are
awarded by TAP-OTE, will be borne by OTE and the
Greek authorities. On the other hand, the costs relating
to the auxiliary pensions and the lump-sum payment is
to be borne entirely by OTE.

Pursuant to Article 74(4)(a) of Law No 3371/2005, the
Greek authorities are to transfer 4 % of the share capital
the Greek State’s
of OTE to TAP-OTE. The value of
contribution to the VRS is calculated by multiplying
the total number of shares (490 582 879)
in OTE by
4 % and by the current OTE stock value as quoted on
the
the Athens Stock Exchange. Under to the Law,
Minister for Economic Affairs and Finance is authorised
to sign contracts effecting the aforesaid transfer and
setting out the rights of the Greek State in relation to
including the Greek State’s right to buy
those shares,
back the shares if it so wishes (call option), but also
the obligation to do so should the pension fund need
cash to fund the pension benefits under the VRS (put
option) at their closing price on the day of the non-
stock-market
and
other details concerning the execution of these options
have not yet been specified, pending the Commission’s
assessment.

Implementing measures

transfer.

(32)

6. Costs of the VRS and value of the Greek State’s
financial contribution

In the notification, the Greek authorities explained that
the costs of the VRS based on the expected departure of
6 000 employees would amount to approximately EUR
1,5 billion spread over a period of seven years (i.e. from
2005 to 2012), with the main costs accruing from 2005
to 2007. In 2005 the expected costs of the scheme were
estimated at around EUR 500 million. At current prices,
the costs would amount
to approximately EUR 1,2
billion (10).

(8) Employees who have already completed 30 years of service and are
entitled to a pension will not qualify for the recognition of notional
i.e. a full pension, but will be entitled to extra incentives.
years,
(9) A previous early retirement scheme was accepted only by around
75 % of employees, which was regarded as a very low percentage.

(10) According to the Greek authorities,

the net present value was
calculated on the basis of on a discount rate of 7,83 % and
reflects the estimated weighted average cost of capital
(WACC)
for OTE as determined by three financial analyst reports issued in
2005.

11.9.2008

EN

Official Journal of the European Union

L 243/11

(33) On 20 December 2005 the Greek authorities informed
the Commission that a total number of 5 525 employees
had submitted a valid application within the required
timeframe for taking part
in the VRS, approximately
the initially envisaged workforce reduction.
90 % of
Notwithstanding the fact
figure would
that
not be known until all applications had been fully
processed and assessed in detail, the Greek authorities
estimate that
the VRS will be
around EUR 1,1 billion (or around EUR 863 million in
net present value terms).

the overall cost of

the exact

(34) As indicated above, the Greek State’s participation takes
its shares in the

the form of a transfer of 4 % of
company to the TAP-OTE pension fund.

(35)

(36)

(37)

Based on the share price of OTE on the date of the
publication of the Law (14 July 2005), the value of the
4 % of the shares to be transferred from the State to the
pension fund was around EUR 315 million. However,
given that the value of the shares will be determined
on the day of the transfer, the State’s contribution may
well be higher. Since July 2005, the share price of OTE
has increased from around EUR 16 in July 2005 to
around EUR 23 by mid-January 2006, and around EUR
22 in early February 2007.

7. The arguments of the Greek authorities

The Greek authorities consider that the State’s contri­
bution to the VRS does not constitute State aid.
In
the Greek State has
providing finance for the VRS,
the State’s
acted like a private investor. Furthermore,
contribution only partially relieved OTE from the extra
costs resulting from the VRS as compared to less costly
similar schemes offered under the generally applicable
labour laws and regulations. Consequently, the aim of
the State’s contribution was merely to restore a level
playing field and therefore not to distort competition.

The Greek authorities take the view that OTE is at a
disadvantage vis-à-vis its competitors in the recently
liberalised market for fixed telephony. Due to the life
tenure status of OTE employees, OTE could not unilat­
erally dismiss staff but had to have recourse to voluntary
redundancy offers.
In order for such an offer to be
attractive, OTE had to offer its employees voluntary
redundancy terms and conditions
reflected the
latter’s permanent status.

that

(a)

(38) More particularly, the State’s contribution to the VRS
would compensate only partially for
the additional
costs caused by two main types of structural disad­
vantages which are due to the legacy of OTE as a
the permanent quasi-civil-
state-owned monopoly:
servant status of OTE employees, guaranteed by law,
and (b) the higher salaries (also imposed by law) which
significantly increase the overall costs of the scheme. As a
result, OTE is put at a disadvantage vis-à-vis its compe­
fixed
titors
telephony. Thus, the State’s contribution can be deemed
to be in line with recent case-law in this area, and in
particular with the judgment of
the Court of First
Instance in Combus (11) according to which freeing a
public-sector company from structural disadvantages as
compared to its private-sector competitors, such as those
due to the ‘privileged and costly status of officials’, does
not constitute State aid.

recently liberalised market

in the

for

(39)

The Greek authorities proposed a two-stage calculation
aimed at identifying separately (a) the financial burden
imposed on OTE by the permanent status, and (b) the
burden imposed by inflated salaries.

(40)

to prior ministerial authorisation (12),

In particular, the financial burden imposed on OTE by
the permanent status is calculated by comparing the
the planned VRS and the costs that would
costs of
have been incurred had OTE been a private company
able to dismiss its staff offering the minimum compen­
sation required by law in the case of dismissal. However,
given that under Greek law mass redundancy schemes
the
are subject
consider
Greek authorities
company
that a private
would also most
likely have had to offer more
generous terms than the minimum legal requirements
In this
in order to implement a wide-ranging VRS.
respect,
the Greek authorities estimate that private
companies would have offered benefits 1,5 to 2,5
times
compensation
payments provided for by law, or on average twice the
legal redundancy compensation payments (13).
In this
case,
the VRS
would be EUR 269 million.

the additional permanency costs of

in excess of

redundancy

the

(11) Case T-157/01 Dansk Busvognmænd v Commission [2004] ECR

II-917.

(12) Currently, existing law allows redundancies of up to two percent of
the workforce with a cap at 30 employees per month. According to
the notification, a large-scale redundancy programme would require
the granting of a special authorisation from the Ministry of Labour.
No such authorisation has been granted at least in the last decade
and no mass redundancy scheme has been undertaken by a Greek
private company on the scale of the VRS.

(13) In this respect, the Greek authorities have made reference to a
redundancy compensation package offered by a large private
operator, Intracom, which offered in the past to certain categories
of its employees twice the legal redundancy compensation (this
coefficient was gradually reduced for higher salaries down to 1,4
times the legal redundancy compensation) within the context of an
early redundancy scheme. In addition, the said company is said to
have offered other advantages such as lump sum payments and
extended insurance coverage for a certain period of time.

L 243/12

EN

Official Journal of the European Union

11.9.2008

(41) Next, comparing the cost of OTE’s VRS with the costs of
a VRS based on private-sector salaries, which are roughly
one third lower than salaries paid by OTE, the Greek
authorities estimate the additional
salary burden on
OTE at EUR 193 million, based on a comparison
between OTE’s costs and twice the minimum legal
redundancy compensation payments. Taking the alleged
additional costs due to both permanency and higher
salaries together,
the total extra burden imposed on
OTE amounts to EUR 462 million, which exceeds the
State’s contribution as estimated at the time of the noti­
fication (around EUR 315 million).

(45)

b. The costs of similar VRSs in the private sector

employees.

authorities,

In particular,

the only example put
according

Second, the Commission questioned whether the Greek
Government’s financial contribution was actually limited
to relieving OTE of alleged extra costs compared to other
operators offering redundancy/early retirement schemes
the Commission
to their
forward by the
doubted that
Greek
to which a normal
company would, in the context of voluntary redundancy
plans, offer around twice the redundancy compensation
required by law for dismissals, could be regarded as an
appropriate benchmark for determining the normal costs
of a company offering an early retirement scheme for
around 5 000 to 6 000 employees who did not enjoy
the special permanent employment status.

(42) On 20 December 2005 the Greek authorities submitted
to the Commission updated calculations based on the
definitive number of employees who had applied for
the VRS. In updating its calculations, the Greek authori­
ties asked the Commission also to take into account
certain extra costs that had arisen due to unavoidable
time delays in the initially planned launch of the imple­
mentation of the VRS (deferral costs) (14).

c. The final cost of the VRS

(46)

Furthermore, the Commission expressed fears that there
was a risk that the financial contribution by the Greek
State, which is not fixed but will depend on the value of
OTE shares at the date of the actual
transfer, would
exceed the thus calculated alleged extra costs to OTE.

d. Labour-related and other advantages resulting from the

legacy of the past

III. DECISION TO INITIATE PROCEEDINGS UNDER
ARTICLE 88(2) OF THE TREATY

(47)

(43)

In its decision to initiate the formal
investigation, the
Commission expressed doubts as to the validity of the
abovementioned arguments of the Greek authorities, for
the following reasons.

a. The financial contribution by the Greek State

(44)

company

First, the Commission questioned whether the financial
contribution was provided in line with the market
economy investor principle since no other investor in
the
early
contributed financially
investors would
retirement
benefit
in the
equally from the
company’s value, without
the Greek State receiving a
return proportionate to its contribution. Furthermore,
the Greek authorities have not shown that they could
expect a reasonable return from their contribution.

scheme. Moreover,

expected increase

to the

all

its employees,

and may continue

The Commission also considered that even if one were to
accept that OTE bears additional costs due to the special
employment status of
this would not
necessarily justify the State’s contribution, given that
to
OTE might have benefited,
benefit,
from other advantages which could neutralise
any possible structural disadvantages. Such advantages
could result
from the specific employment status of
OTE employees, the specific legal framework applicable
to OTE or specific interventions, reducing OTE’s labour
costs below the labour costs of companies subject to the
generally applicable labour laws. References were made
to a possible exemption of OTE from unemployment
contributions and a relief in the past from its pension
obligations.

(48)

Finally, the Commission also questioned whether OTE
derives benefits
former monopoly position
compensating for the disadvantages resulting from the
extra costs of the VRS, in particular as regards its fixed
telecom network.

from its

(14) According to the Greek authorities, owing to a delay in the imple­
mentation of the VRS, some employees would no longer be eligible
under the VRS since they had reached the mandatory retirement
age. Moreover, given that it will take another year for OTE fully to
implement the VRS, OTE would still have to continue paying (high)
salaries for those eligible for early retirement. If these (deferral) costs
are taken into account, the total costs of the VRS increase to EUR
1,37 billion, or approximately EUR 1 billion expressed in net
present value terms.

IV. COMMENTS FROM INTERESTED PARTIES

(49)

Comments were submitted by a law firm which has also
asked for anonymity since it is involved in litigation
against OTE on behalf of other operators. The law
firm’s main arguments can be summarised as follows.

11.9.2008

EN

Official Journal of the European Union

L 243/13

(50)

submitted to OTE shareholders

First, the Greek State’s contribution does not fulfil the
requirements of the private investor principle since the
VRS was never
for
approval. The Greek authorities had also failed to show
they could expect a reasonable return from the
that
contribution at issue. Second, it appears that every year
the State covers part of the deficit of OTE’s social security
fund, TAP-OTE. Third, with regard to OTE’s former
monopoly advantages, the law firm takes the view that
the independence of the national regulatory authority is
undermined since its board is appointed by the Greek
authorities, i.e. the majority shareholder of OTE.

cannot be justified as compensation for a structural
disadvantage or be considered to fulfil the requirements
of the private investor principle, the contribution could
still be deemed compatible under Article 87(3)(c) of the
Treaty on the basis of the principles derived from the
EDF decision (16) and those applicable to the stranded
costs in the energy field (17).

(51) According to the law firm, the regulatory authority has
yet to issue decisions in cases involving alleged infrin­
gements by OTE for fear of undermining the company’s
financial position. OTE is not subject to advertisement
tax (the aggeliosimo), which amounts to 20 % of
the
advertisement’s placement
fee and which all other
companies pay for advertising on any medium. The
value of this subsidy is estimated at EUR 20 million
per year. Finally,
the public fixed
through control of
line network, OTE has engaged in a series of anticompe­
titive and abusive practices in the electronic communi­
cations markets that have not always been remedied by
the regulatory authority.

(54)

In their reply the Greek authorities submitted a number
of reports drawn up by independent experts that have
been used to (a) calculate and certify the overall cost of
the VRS (KPMG has audited OTE’s 2005 financial results
and certified the total cost of the VRS), (b) calculate the
cost of permanency and the cost of higher salaries for
OTE’s employees by using the appropriate benchmark in
Greece (CRA International and the Hay Group undertook
the relevant studies), and (c) describe the labour regu­
latory framework in Greece applicable to private under­
takings in general and to OTE in particular (study by Mr
Levantis, professor of labour law at the University of
Athens). The Greek authorities’ main line of argument
can be summarised as follows.

(52)

The law firm accordingly requests that the aid be subject
to conditions that address the above issues.

V. THE REPLY BY THE GREEK AUTHORITIES

(55)

(53)

does

contribution

The Greek authorities reiterated their main argument
that, in line with the Combus judgment, the contribution
of the Greek State to the costs of the VRS does not
confer any economic advantage on OTE, first because
the
normal
employment-related budgetary burdens of OTE, and
second because it covers
solely the removal of a
structural disadvantage of a former public undertaking.
the
The Greek authorities consider in particular that
permanent status of OTE employees constitutes a major
burden for the company and a structural obstacle for its
further privatisation (15). Where the State’s contribution

not mitigate

the

(15) According to the Greek authorities,

incentives

the permanent status has
further adverse effects on the company’s overall labour structure.
Not only are salaries set by law at high levels, but their structure
removes
for employee development and increased
productivity since, given the legal prohibition, salaries cannot be
raised. Moreover, new staff cannot be taken on at middle and senior
management level since all new recruits have to be assigned to
entry-level posts. Neither can new recruits assume any kind of
management
function since this would undermine the career
progression guaranteed by the permanent status to existing staff.
None of these restrictions apply to private operators.

a. The necessity for a VRS

rights deriving from collective

In response to the Commission’s reservations as to
whether other means could have been used to restructure
OTE, the Greek authorities underlined that the Greek
Constitution provides explicitly for the protection of
labour
employment
agreements in force. Thus, a mandatory redundancy
scheme that might have been imposed by law in order
to put an end to the permanent status of OTE employees
could not be implemented, for it would inevitably result
in numerous lawsuits on constitutional, labour and social
security law grounds, thus defeating the whole objective
of the restructuring of OTE personnel (18).

(16) Commission Decision of 16 December 2003 on the State aid
granted by France to EDF and the electricity and gas industries
(OJ L 49, 22.2.2005, p. 9).

(17) See Commission’s Communication relating to the methodology for
analysing State aid linked to stranded costs, at http://ec.europa.eu/
comm/competition/state_aid/legislation/stranded_costs_en.pdf
(18) In this respect, the Greek authorities have further stated that the
new legislation which came into force in December 2005 (Greek
Law No 3429/2005) with regard to wholly or partially state-owned
enterprises provides for the removal of the permanent status for
new recruits only. However, with regard to existing employees who
enjoy permanent status, given that the legislation does not affect
the permanent status of existing employees, OTE had no alternative
other than to implement a VRS.

L 243/14

EN

Official Journal of the European Union

11.9.2008

b. The costs of the VRS

c. The KMPG 2005 IRFS Certificate: the nominal value of

In their reply, the Greek authorities confirmed that out of
6 070 eligible employees, OTE finally received appli­
cations from 5 494 employees (91 % take-up). The bene­
ficiaries of the VRS are further divided in two sub-groups:
(a) 4 859 who will qualify for
the recognition of
‘notional’ years — this group is covered by the present
VRS — and (b) 635 employees who are close to
retirement (i.e. who are entitled to full pension rights
but who have not reached the mandatory retirement
age) who will
retirement
incentives to leave (19) — this group is covered by the
‘regular’ VRS.

supplementary

receive

the VRS

(60) According to OTE’s certified accounts for 2005,

the
estimated total cost of the VRS in terms of payments
amounts to EUR 1 161 827 920. The net present value
(NPV) of the VRS is estimated at EUR 939 607 196 (21).
This sum is the result of reducing the nominal value of
the VRS using a discount rate of 3 %, which reduces the
nominal amount by EUR 67,7 million (22), and excluding
the sum of EUR 154,4 million which relates to indem­
nities that have already been provisioned for in the 2004
financial accounts of OTE (1 161,8 – 67,7 – 154,4 =
the VRS (EUR 939,6
939,6). The certified NPV of
the tax
million) does not, however,
benefits accruing to OTE under the corporate tax law
(see below the CRA report).

take account of

(56)

(57)

The overall nominal costs of the VRS have been audited
and verified by KPMG, the auditors of OTE. These are the
costs audited in OTE’s 2005 International Financial
Reporting Standards (IFRS) Statements (20). Part of the
i.e. the cost of the one-off VRS payments,
VRS cost,
has been calculated by Prudential, an independent
employee benefits consulting firm. Prudential carried
out an actuarial study pursuant to Article 74 of Law
No 3371/2005. The Greek authorities further commis­
sioned a report by a global management consultancy, the
Hay Group, which confirmed that the legal redundancy
compensation package
a
reasonable benchmark for calculating the compensation
package
an undertaking would under normal
circumstances offer its employees to leave the company.

factor of 1,5 times was

that

(61)

(58)

Based on the above Hay Group report, another interna­
tional economics and antitrust consultancy, Charles River
Associates International (CRA International), compiled a
final report in which it calculated the extra costs incurred
by OTE as compared to its private sector competitors, i.e.
the cost of permanency and the cost of higher salaries.

(59)

The main findings of
summarised as follows.

the individual

reports can be

their current salary,

(19) For these employees, because the pension received under the VRS
would equal
the scheme is less attractive
compared with employees who have not reached the top of the
salary scale (the latter will receive a pension exceeding their current
salary because their pension is calculated based on the projected
salary achieved if
they continued working during the notional
years). In order to ensure maximum participation in the VRS, an
extra incentive to leave is therefore provided to employees having
already reached the top of OTE’s salary scale.

(20) It should be recalled that

from 2005, all publicly-traded EU
companies are required to prepare their consolidated accounts
using the IFRS. See Commission Regulation (EC) No 1725/2003
of 29 September 2003 adopting certain international accounting
standards in accordance with Regulation (EC) No 1606/2002 of the
European Parliament and of the Council (OJ L 261, 13.10.2003,
p. 1).

d. The Hay Group report: comparisons with other VRSs in

Greece and the EU

report

companies. The Hay

The Hay Group report collected data from various
companies in Greece and in the rest of Europe that
had experienced a downsizing process over the past
years. It surveyed more than 40 different organizations
that are Greek-owned or local operations of multina­
the
tional
assumptions made by the Greek authorities
in its
earlier submissions, namely that:
(a) there is no early
retirement scheme in Greece or elsewhere in Europe
that is comparable to OTE’s (that is, a VRS that accom­
modates ‘structural’ costs like those of OTE, such as
permanency and fixed high salaries),
the
average severance packages in the case of a normal
VRS undertaken by a private company are indeed 1,5
times the indemnity provided by law,
in particular as
regards the age group of 51 years (23).

confirms

and (b)

e. The CRA report: calculating OTE’s extra costs

(62) On the basis of the above studies, CRA International has
calculated the NPV of the costs that OTE will incur for a
total of 5 494 employees as a result of implementing the
VRS.

(22) It

should be

(21) The NPV represents the market value of the VRS, i.e. the amount
that OTE would have to pay to a third party if this third party took
over OTE’s obligations accruing from the VRS.
recalled that

submission on
20 December 2005, the Greek authorities, at a time when the
nominal VRS was estimated at EUR 1 161,0 million, had calculated
the NPV of the VRS at EUR 863 million using as a discount rate
OTE’s WACC (weighted averaged cost of capital) estimated at
7,83 %.

in their

earlier

(23) See footnote 13.

11.9.2008

EN

Official Journal of the European Union

L 243/15

(63)

In computing the NPV of the VRS a key issue was the
use of an appropriate discount rate. CRA International
acknowledges that a fundamental principle of modern
finance is that the discount rate applied to any stream
of cash flow should reflect the level of systematic risk
inherent in the cash flow stream. According to CRA
is appropriate to use the company’s
International,
weighted average cost of capital (WACC), which is used
by economists in most cases (24).

it

(64) However, CRA International takes the view that in the
present case, the contribution of systematic costs to the
costs arising from the VRS is small to insignificant. This
is because (a) the evolution of salaries of OTE employees
follow a strict scale that significantly reduces the uncer­
tainties about salary variations over time, and (b) any
uncertainty that may persist is not correlated to OTE’s
performance (the annual increase in the salary grid is not
correlated to OTE’s overall economic performance). Thus,
according to CRA International, the appropriate discount
rate should reflect the available return on risk-free secu­
rities. Taking as an example the ten-year, EUR 2,1 billion
bonds auctioned by the Greek authorities on 7 June
2005 (the year of the VRS) at a weighted average yield
of 3,41 %, and the five-year, EUR 1,68 billion bonds
auctioned a month later at a weighted average yield of
2,71 %, CRA International takes the spot risk-free interest
rate for all maturities to be about 3 % (25).

(67)

(68)

(65)

Based on these assumptions, CRA International has
estimated the NPV of the VRS at EUR 1 086,2 million.
Contrary to KPMG calculations (see recital 60 above),
CRA International calculations do not take into consid­
eration the EUR 154,4 million already provisioned by
OTE in its 2004 accounts, since they are not bound by
the accounting constraints of an auditor. Moreover, given
that all the VRS payments by OTE are deductible for
corporate tax purposes under Greek corporate law,
CRA International has estimated that the real NPV of
the VRS stands, post-tax, at EUR 784,3 million (26).

(66) On the basis of the above post-tax amount, CRA Inter­
national calculated the costs
that OTE would have
incurred had it been a private company. To this end,
CRA International assumed that
(a) according to the
conclusions drawn by the Hay Group report, a private

(24) This was also the approach taken by the Greek authorities in their

submissions of 4 November 2005.
(25) In this respect, CRA International

is in line with the certified
accounts of OTE by KPMG, which also used a discount rate of 3 %.
(26) Having only the responsibility to verify OTE’s pre-tax accounts,
KPMG did not need to calculate the post-tax NPV of the nominal
VRS.

company would under normal circumstances offer a
package amounting to 1,5 times the legal redundancy
indemnity, and that (b) according to the data presented
in the 2004 KPMG survey of compensations and benefits
in the Greek high tech sector, this percentage would
apply to salaries which are 33 % lower than those paid
by OTE. Based on the assumption that OTE would
the
provide
legal
to 150 % of
requirement but with private-sector salaries,
i.e. 33 %
lower than those of OTE, CRA International concluded
that a private company other than OTE would have
incurred costs, after
tax, amounting to EUR 314,4
million for implementing the VRS.

a package

equal

Based on a comparison of the post-tax present value (PV)
of the VRS (EUR 784,3 million) with the costs that OTE
would have incurred had it been an ordinary private
company (EUR 314,4 million), CRA International has
calculated that the extra costs borne by OTE for the
to EUR 469,9
implementation of
million (27).

its VRS amount

For the sake of completeness, CRA International also
calculated the extra costs borne by OTE on the basis
of two alternative scenarios. The first scenario is based
on the higher OTE WACC discount rate (7,8 %). Under
this scenario, the extra burden is reduced to EUR 390,4
million. The second scenario assumes that there is no tax
deductibility. Under
the extra burden
increases to EUR 540,2 million when using the OTE’s
WACC, and to EUR 643,4 million when using the risk-
free discount rate of 3 %.

scenario,

this

f. Absence of labour-related or other advantages

(69) On the basis of a study carried out by Prof. Levantis of
the University of Athens, the Greek authorities stress that
from any labour-related
that OTE does not benefit
advantage. More particularly,
the Greek authorities
confirm that OTE is not exempted from payment of
in
unemployment
connection with the Combus judgment, the Greek au-
thorities argue that the existence of structural advantages
was not part of the Court’s analysis, and neither were
they part of the Commission’s assessment of the com­
patibility of the aid granted by France to EDF.

contributions (28).

In any

event,

(27) These extra costs are broken down as follows: burden to OTE of
the permanent status: EUR 322,9 million, and burden to OTE of
higher salaries: EUR 147,0 million.

(28) According to the Greek authorities, OTE,

like all other private
companies, pays compulsory employer’s unemployment contri­
butions as required under the applicable social security legislation.
This amounts to 2,76 %, while an additional 1,33 % is paid by the
employee.

L 243/16

EN

Official Journal of the European Union

11.9.2008

(70) With regard to advantages that OTE may derive from its
former monopoly position, the Greek authorities recall
that the fixed line market has been fully liberalised since
2001, and that OTE has been the subject of extensive ex
ante regulation in accordance with the provisions of the
applicable regulatory framework for electronic commu­
nications services and networks. The remedies imposed
on OTE by the national regulatory authority, the Hellenic
Telecommunications and Post Commission (EETT),
in
relation to the fixed markets have led to competitive
entry from alternative operators and the subsequent
loss of market share by OTE.

g. The undertaking offered by the Greek authorities

(71)

In their reply, the Greek authorities based their calcu­
lations on OTE’s share price at close of
trading on
25 April 2006, namely EUR 17,98. Thus, on 25 April
2006, 4 % of the stock of OTE corresponded to a stock
value of EUR 353 million. The value of the Greek State’s
contribution to the VRS, as of 25 April 2006, was
therefore 25 % lower than the amount of EUR 469,9
million that corresponds to the extra cost of the VRS.

(72) However, given that the price of OTE shares is subject to
fluctuation on the Athens Stock Exchange,
if the total
value of the 4 % of OTE’s stock exceeds the extra costs
borne by OTE, Greece expressly undertakes to amend
Article 74 of Law No 3371/2005, so as to limit the
State’s financial contribution accordingly.

(73)

(74)

h. Reply to third-party comments

The Greek authorities underline that in accordance with
Article 34 of Greek Company Law No 2190/1920, the
general meeting does not have the competence to adopt
management decisions; such competence is vested in the
board of directors (Article 9(d) of OTE’s statutes). The
VRS was thus discussed and decided by the company’s
board of directors and later presented to institutional
investors.

The Greek authorities argue that the comments made
about the fact that every year the Greek State covers
the deficit of TAP-OTE are based on an
part of
incorrect understanding of Greece’s
security
social
the main
system. The Greek authorities reiterate that
is a
pension fund for OTE employees, TAP-OTE,
separate legal entity, governed by public law,
in the
same way as all other pension funds in Greece. It has
its own board of directors, administration, budget and
finance departments. Almost all existing pension funds
are public law funds, and are independent
from the
in which the employees work, are self-
companies
governed and not profit-oriented. Pension rights are
vested rights under the Greek Constitution (Article 25).
The basic characteristics of
the Greek social security
system are its obligatory, public and universal character.
The Greek pension system is thus a ‘pay as you go’

system. Deficits of the various public law funds are not
financed by the employers or the employees, but by the
State, the latter being under the constitutional obligation
to guarantee that all pensions are fully paid.

(75)

From 1994 until 2001, although a private law company
under state control and totally independent
from the
public law pension fund TAP-OTE, OTE was mandated
through ad hoc legislation and through collective labour
agreements to cover the deficit of TAP-OTE, and thus to
operate a kind of a social
insurance arrangement on
behalf of the State. OTE’s liability to cover such ad hoc
deficits of TAP-OTE increased yet further its non-wage
costs compared to its competitors and new entrants in
the market and constituted a clear disadvantage for the
company.

(76) With regard to the alleged advantages that OTE derived
from its former monopoly position, the Greek authorities
emphasise that since 2001,
the Greek telecommuni­
cations market has been fully liberalised and subject to
the ex ante regulatory supervision of EETT, the national
regulatory authority. The alleged abusive behaviour of
OTE would have to be dealt with under the respective
sector-specific rules of the new regulatory framework and
the relevant directives thereof. For the Greek authorities,
compensatory measures that pertain to a fully liberalised
requested through a completely
market
i.e. the State aid assessment of state
different avenue,
measures which are solely labour-related.

cannot be

(77)

Finally, the Greek authorities reject as incorrect the third
party’s allegation that OTE is exempt from the adver­
tisement
tax, whereas other companies in Greece are
liable to pay it. Although, according to Article 19(2) of
Law No 1264/1982, public undertakings or utilities (like
OTE) are exempt from the payment of the advertisement
tax, a recent judgment by the Administrative Court of
First Instance (Decision No 9564/2005) has interpreted
the notions of ‘public service’ and ‘utilities’
in Law No
1264/1982 as meaning that not only OTE but every
telecommunications operator is exempt from the adver­
tising tax (29),
irrespective of its status as a public or
private company (30).

(29) The Greek authorities also state that Article 24 of the recent Law
No 3470/2006 clearly provides that OTE and other telecom service
providers no longer enjoy a specific status that gives them the right
to be exempted from the advertising tax. Pursuant to Law No
1264/1982, public companies or utilities are exempted from the
advertising tax only if
their share capital belongs by absolute
majority to the Greek State. Accordingly, OTE and all other
telecom providers are now liable to pay the advertisement tax.

(30) According to the Greek authorities,

the Administrative Court
the characterization of a company as a public
concluded that
utility does not
to the legal
framework within which it operates, but depends solely on the
nature of
the services it provides. Therefore, according to the
Court, undertakings offering goods and services deemed vital for
society, such as telecommunications, water supply and energy,
constitute utilities.

status, or

to its

relate

legal

11.9.2008

EN

Official Journal of the European Union

L 243/17

VI. ASSESSMENT OF THE AID

a. Compliance with the private investor principle

Existence of the aid

(84)

(78) Article 87(1) of the EC Treaty provides that any aid
granted by a Member State or through state resources
in any form whatsoever which distorts or threatens to
distort competition by favouring certain undertakings,
insofar as it affects trade between Member States,
is
incompatible with the common market.

In line with the requirements arising from the case-law,
in order to determine whether the Greek State’s financial
contribution towards the costs of OTE’s VRS can be
regarded as being in line with the behaviour of a
private investor acting under normal market conditions,
it is necessary to consider whether in similar circum­
stances a private investor of a size comparable to that
the State might have provided a similar financial
of
contribution, namely the equivalent of 4 % of OTE’s
shares (31).

(79)

(80)

The classification of a national measure as State aid
the following cumulative conditions
presupposes that
are met: (a) the measure is granted by a Member State
from state resources in whatever form; (b) the advantage
is selective; and (c) the measure distorts or threatens to
distort competition and is capable of affecting trade
between Member States.

(85)

In the present case it is not disputed that to the extent
that the State proposes to transfer to TAP-OTE 4 % of its
shareholding in OTE as a contribution towards the
overall costs of the company’s VRS, state resources are
involved in the measure. The holding by the State of 4 %
of OTE’s shares constitutes an asset with financial value.
This asset is transferred without any compensation at the
market price. As a result, the measure is a transfer of
state resources.

a public

authority (32). OTE being

In that respect, a distinction must be drawn between the
obligations which the State must assume as the owner of
the share capital of a company and its obligations as a
public
limited
company, the Greek State as the majority owner of the
share capital of the company would have been liable for
the debts of the company only up to the liquidation
value of its assets. Social security and other labour-law-
related
company
are normally
concerned to bear, not for its shareholders. Furthermore,
it should be stressed that OTE is not a company which is
currently in a difficult financial situation or unable to
meet on its own the financial liabilities of the VRS.

liabilities

the

for

(81) Moreover, although the direct recipient of the aid is TAP-
OTE — a public law pension fund which is part of the
wider social security system of Greece — the real bene­
ficiary of the measure is OTE,
in that the company is
relieved of part of its social security obligations resulting
from the VRS in question. No other company enjoys that
particular advantage. As a result, the measure is selective
in nature.

(82) Neither is it contested that, OTE being a nationwide
network operator engaged in the provision of electronic
communications networks and services including the
provision of
international electronic communications
services, any aid granted is capable of affecting trade
between Member States.

(83) However, as to the question whether this state contri­
bution confers an advantage on OTE which distorts or
threatens to distort competition, the Greek authorities
have argued (a)
they have acted as a private
investor, and (b) that the measure does not grant an
advantage to OTE since it merely provides compensation
for the structural disadvantages of the latter due to the de
facto permanent employment status of its employees and
the higher salary costs imposed on it by law during the
pre-liberalisation period.

that

(86)

Therefore, the obligations arising from the cost of the
early retirement redundancies and the payments of any
other associated employment benefits cannot be taken
into consideration for
the purpose of applying the
private investor principle (33).

(87) Moreover, no shareholder other than the Greek State has
contributed to the extra costs of the restructuring plan of
OTE, although the expected improved profitability of
OTE should benefit all investors without distinction. In
these circumstances, the behaviour of the Greek State
was different from that of the other private investors in
OTE. Even if the special position of the State as the
largest
justify different behaviour,
one would normally expect that where one of the share­
holders of a company provides
financial assistance
without the other shareholders doing so in the same
manner, such a shareholder would receive some sort of
compensation by way of an increased stake in the
company or suchlike. However, in the present case, the
State receives no compensation in excess of that of all
the other investors in the company.

shareholder might

(31) Case C-305/89
paragraph 19.

Italy

v

Commission

[1991]

ECR I-1603,

(32) Joined Cases C-278/92, C-279/92 and C-280/92 Spain v Commission

[1994] ECR I-4103, paragraph 22.
(33) Case C-305/89, loc. cit., paragraph 22.

L 243/18

EN

Official Journal of the European Union

11.9.2008

(88)

the

State’s

financial

The fact that the share price of OTE has increased since
the announcement of the VRS does not necessarily mean
that
contribution should be
considered, for this reason alone, compatible with the
In principle, any financial
private investor principle.
contribution by
improving the
financial position of a quoted company is likely also to
improve the latter’s share price, and this regardless of
whether such a contribution qualifies as aid within the
meaning of Article 87(1) of the Treaty.

the State

towards

(89)

For all the above reasons, the argument of the Greek
authorities that the State’s contribution to the costs of
the VRS complies with the private investor principle
should be rejected.

b. Absence of an economic advantage

(90) According to settled case-law, the concept of aid encom­
passes advantages granted by public authorities which, in
various ways, mitigate the charges which are normally
included in the budget of an undertaking (34). The
Court of Justice has held in this respect that a partial
reduction of social charges devolving upon an under­
taking
of
aid within
Article 87(1) of the Treaty if that measure is intended
partially to exempt that undertaking from the financial
charges arising from the normal application of
the
general social security system, without there being any
justification for this exemption on the basis of the nature
or general scheme of this system (35).

the meaning

constitutes

(91)

The Greek authorities contest that the partial reduction of
OTE’s costs of the VRS confers an advantage on the
company, and has an impact on competition, on the
grounds that it frees OTE from a structural disadvantage
and ensures that the company will be subject to the
same, less burdensome, labour law arrangements as any
other company in the Greek electronic communications
market. In this regard, the Greek authorities have relied
on the Combus judgment delivered by the Court of First
Instance.
In that case, the Court stated that a (State)
measure which was ‘introduced to replace the privileged
and costly status of the officials employed by Combus
with the status of employees on a contract basis
comparable to that of employees of other bus transport
undertakings competing with Combus’ did not constitute
aid, for ‘the intention [of the Danish government] was

(34) See, inter alia, the judgments in Case 30/59 De Gezamenlijke Steen­
kolenmijnen in Limburg v High Authority [1961] ECR 1; Case
C-387/92 Banco Exterior de España [1994] ECR I-877, paragraph
13; Case C-241/94 France v Commission [1996] ECR I-4551,
paragraph 34; and Case C-256/97 DM Transport [1999] ECR I-
3913, paragraph 19.

(35) Case 173/73 Italy v Commission [1974] ECR 709, recital 15; to the
same effect, judgment in Case C-301/87 France v Commission [1990]
ECR I-307, recital 41.

(92)

(93)

(94)

thus to free Combus from a structural disadvantage it
had in relation to its private-sector competitors’ (36).

the Court of

Justice has decided that

it should be noted that the finding in
In this regard,
Combus has not been confirmed by the Court of
Justice. Certain judgments of the Court of
Justice tell
against the assumption that the provision of compen­
that a
sation for a structural disadvantage means
In its settled
measure cannot be categorised as aid.
case-law,
the
extent
to which a measure constitutes aid must be
determined according to the effects of the measure and
not by reference to its causes or aims (37). The Court has
also decided that any measure exempting an undertaking
from the charges which are normally included in its
budget constitutes State aid (38). The Court has made
clear that this includes, for example, the costs linked to
employee pay (39). In the light of these considerations,
the Court has rejected the notion that a measure does
not give an advantage to the undertaking solely because
it compensates some disadvantage which the undertaking
has suffered in the past (40).

is true that

the labour law applicable to OTE is
It
applied to any other private
from that
different
company in Greece,
in that the permanent tenure of
OTE employees and their higher salaries cannot be
modified unless new legislation is passed giving effect
to the consent required of OTE’s employees. Overall,
the labour rules applicable to OTE increase its labour
security costs and deprive the company
and social
from the
competing
by
freedom enjoyed
companies when it comes to restructuring their labour
costs in line with the prevailing market conditions.

other

In this regard, the present case bears a number of simi­
larities with Combus. In Combus, the Danish State did not
the officials
compensate the company concerned but
employed by it. Likewise, the Greek State is not compen­
sating OTE but the employees’ pension fund for the loss
of revenue due to early retirement. Like in Combus, the
status of OTE’s employees constitutes a
permanent
‘privileged and costly status’ vis-à-vis
the status of
private-sector employees. Like in Combus the intention
to free OTE ‘from a
of
structural disadvantage it ha[s] in relation to its private-
sector competitors’.

the Greek Government

is

(36) Case T-157/01, loc. cit., recital 57.
(37) Case 173/73 Italy v Commission [1974] ECR 709, paragraph 13;
Case C-310/85 Deufil
[1987] ECR 901, paragraph 8; Case
C-241/94 France v Commission [1996] ECR I-4551, paragraph 20.
(38) Case C-387/92 Banco Exterior [1994] ECR I-877, paragraph 13;
ECR I-4551,

v Commission

[1996]

Case C-241/94 France
paragraph 34.

(39) Case C-5/01 Belgium v Commission

[2002]

ECR I-1191,

paragraph 39.

(40) Case C-30/59 Gezamenlijke Steenkolenmijnen [1961] ECR 3, para­
graphs 29 and 30; Case 173/73 Italy v Commission [1974] ECR
709, paragraphs 12 and 13; Case C-241/94 France v Commission
[1996] ECR I-4551, paragraphs 29 and 35; Case C-251/97 France v
Commission [1999] ECR I-6639, paragraph 40 and 46-47; see also
Case T-109/01 Fleuren Compost [2004] ECR II-127, paragraph 54.

11.9.2008

EN

Official Journal of the European Union

L 243/19

(95)

Furthermore, as was the case in Combus, the State’s inter­
vention does not aim to make up for, or alleviate OTE
from,
its past pensions obligations resulting from the
period of time when the company became subject to a
sui generis labour law framework (past liabilities), but is
strictly limited to putting OTE in line with the private
sector for its future pension rights.

(96)

That being said,
the
factual and legal context of the case at hand exhibits a
number of particularities compared with Combus.

the Commission also notes that

(97)

to private-law contract

in Combus the Danish authorities’ compensation
First,
aimed to facilitate the planned change of status of the
company from public to private, hence the financial
compensation (bonus) offered by the Danish Government
to Combus employees whose status changed from public
servants
employees. OTE,
however, became a public limited company in 1994,
without the State taking any appropriate measures at
the company’s labour rules
the time to ensure that
would be aligned on those of a normal public limited
company. Nor did the State intervene in 2001, when
OTE lost its exclusive right to provide fixed voice tele­
and the Greek electronic
services
communications
communications market was fully liberalised.

(98)

In this respect, it is not impossible that the high number
of employees enabled OTE, especially during the critical
years before and immediately after full liberalisation, to
secure and maintain its current dominant position and
continue to be present in virtually all segments of the
electronic communications market.

(99) Moreover, as stated in recital 93, the concept of aid in
the EC Treaty covers only measures
Article 87(1) of
which lighten the burdens normally assumed in an
undertaking’s budget and which are to be regarded as
an economic advantage which the recipient undertaking
under normal market
would not have obtained
conditions (41).

(100)

In this respect, it should be recalled that according to the
case-law,
the costs for undertakings that arise from
collective agreements concluded between employers and
trade unions, which undertakings are bound to observe,
either because they have acceded to those agreements or
because those agreements have been extended by regu­
lation, are costs that are included, by their nature, in the
budgets of undertakings (42).

(41) Case 173/73 Italy v Commission [1974] ECR 709, paragraph 26;
Case C-387/92 Banco Exterior de España [1994] ECR I-877, para­
graphs 12 and 13; and Case C-280/00 Altmark Trans and Regierung­
spräsidium Magdeburg [2003] ECR I-9919, paragraph 84, and the
judgments cited therein.
(42) Case C-482/99 France

v Commission

ECR I-4397,

[2002]

paragraph 40.

(101) Although, as pointed out in recital 93, the labour rules
imposed on OTE are indeed an exception to the ordinary
labour law applied to date to any other private company
in Greece, and the permanent status and the high salaries
guaranteed to OTE employees were not in reality the
result of a freely negotiated collective agreement, but
rather imposed on the company by the State itself, the
Commission notes that at no time since OTE became a
listed company did the Greek authorities indicate that
OTE’s labour law liabilities did not have to be assumed
by the company’s normal budget or that the State would
have
costs of
permanency and high salaries imposed by law on it.
Likewise, OTE’s stock valuation was also based on the
assumption that the permanency and high salary costs of
OTE are normally for OTE’s budget to bear.

to compensate OTE for

extra

the

(102) These considerations, examined in conjunction with the
findings in the Combus case, indicate that the measure at
issue can be regarded as aid. However, the matter does
not need to be pursued further since, for the reasons set
out in detail below, it is in any event compatible with the
common market under Article 87(3)(c) of the Treaty.

VII. COMPATIBILITY OF THE AID WITH THE COMMON
MARKET

the Greek authorities

(103) The Commission notes that the planned contribution of
the State to the costs of the VRS of OTE is part of wider
the
plan of
employment
to
applicable
guarantee its long term viability and to improve the
functioning of
the electronic communications market.
The VRS is thus a necessary step towards the further
privatisation of OTE.

to restructure
to OTE so as

regime

(104) The Commission therefore considers that the assessment
of the compatibility of the measure with the common
market needs to be based directly on Article 87(3)(c) of
‘aid to facilitate the
the EC Treaty which states that:
development of certain economic activities or of certain
economic areas, where such aid does not adversely affect
trading conditions to an extent contrary to the common
interest’ may be considered to be compatible with the
common market.

(105) For an aid measure to be considered compatible with the
common market on the grounds that it facilitates the
development of economic activities or certain economic
areas, it must improve the way the economic activity is
carried out. Aid is compatible under Article 87(3)(c) only
where it does not adversely affect trading conditions to
an extent contrary to the common interest. In carrying
the Commission pays particular
out
attention to the
criteria of necessity and propor­
tionality (43).

its assessment,

(43) Case T-187/99 Agrana Zucker und Stärke AG v Commission [2001]

ECR I-1587, paragraph 74.

L 243/20

EN

Official Journal of the European Union

11.9.2008

a. The measure is in line with the common interest

(111)

(106) By relieving OTE from the extra costs it bears as a former
public undertaking due to the permanent employment
status and the high salaries of
the notified
measure will enable the company to operate freely in
the fully liberalised electronic communications market
and to make the necessary adjustments to respond to
market
that
affect the company’s viability in the long term.

technological developments

and other

its staff,

these

smaller

annual VRSs

In particular, the investigation showed that since 1996
and up to 2004, OTE allowed 8 173 employees to retire
early. However,
(900
employees on average each year) were offered only to
employees who were already entitled to a pension but
could still continue to work until
the conditions for
mandatory retirement were met (45). Accordingly, these
involve the recognition of any
past VRSs did not
notional
and
therefore cannot be compared to the present VRS as
far their structure and scope are concerned.
In that
sense, the previous VRSs implemented by OTE were no
different
from equivalent VRSs implemented by any
other private company or OTE’s current ‘regular’ VRS (46).

concerned,

employees

to the

years

(107)

In particular, the reduction of around one third of OTE’s
staff through the VRS, together with the consent of OTE
employees to abolish permanency for future recruits in
exchange for the early retirement package offered by
OTE, are key components of the overall restructuring
operations of OTE that should guarantee the company’s
profitability, efficient operations and further privatisation.
To date,
the permanent employment status of OTE
employees, their excessive number and the fixed salary
regime applied to them constitute major obstacles to the
further privatisation of the company and to the exit of
the Greek State from OTE.

(112)

In the present case, a VRS which would have merely
offered early retirement only to employees who were
entitled to a pension but had not yet
reached the
mandatory retirement age would not have led to the
highest possible take-up since a number of eligible
employees would still have preferred to remain in
employment in order to receive the maximum possible
pension (47).

(108) The ongoing transformation of OTE from an ex-mono­
polist to a company that is subject to the same legal
in Greece,
framework as any other private operator
with the subsequently envisaged relinquishment by the
Greek State of its control over the company, improves
the operation of the Greek electronic communications
in the
lowers the barriers to entry and exit
market,
market (44) and is beneficial in the longer term to end-
users.

(113)

(109) Therefore the planned financial contribution of the Greek
State to the costs of the VRS is in line with the common
interest.

b. The aid is the appropriate instrument

In these circumstances, the decision of OTE to recognise
up to seven notional years of service to all employees
who would have been subject to mandatory retirement
between 2005 and 2012, and thus offer them an early
retirement option with a full pension, appears to have
been the only means likely to lead to the timely release
of a significant number of employees. An employee that
enjoys a quasi-civil-servant status would decide to exit
the company only if the employer offered the appro­
priate incentives to that effect. OTE needed therefore to
offer at least adequate compensation for the economic
benefits that an employee would have continued to enjoy
had he stayed under the protection of permanency. The
subsequent successful take-up of the VRS (around 91 %
of all eligible employees) confirms
the further
incentives offered by OTE to its employees in the form
of recognised notional years of service is an appropriate
instrument.

that

(110) At

the

the opening of

the
Commission expressed reservations as regards the need
for the present VRS by reference to other previous VRSs
that were financed entirely by OTE.

investigation,

formal

to date, by the

(44) These obstacles are due to the fact that entry to the Greek elec­
tronic communications market through the acquisition of OTE is
employment
prevented,
conditions applied in OTE and by the fact that OTE employees
enjoy a de facto permanent status, which prevents OTE from
being taken over by other business groups. On the other hand,
and for the same reasons, exit from the market, in the form of a
relinquishment by the State of
seems at present
extremely unlikely.

extremely inflexible

its control,

choose

(45) For instance, employees with 30 years of service (right to a pension)
could continue to work until
they reached the age of 58 or
completed 35 years of service, whichever happened first. Such
to continue working until
employees would rather
mandatory retirement in order to increase the calculation base of
their pension. As the Greek authorities pointed out, salaries grow at
a higher rate than pensions, and OTE employees generally prefer to
continue working for the company since pensions are calculated by
reference to the last salary.
(46) As mentioned in recital 56,

the ‘regular’ VRS concerns only
employees who have already acquired pension rights but have
fulfilled the conditions for mandatory retirement. The
not yet
involve ‘notional’ years and therefore its
regular VRS does not
costs are not covered by the Greek State’s contribution.

(47) See footnote 34.

11.9.2008

EN

Official Journal of the European Union

L 243/21

status

(114) OTE could not have gone back to resorting to other less
costly measures such as a redundancy plan, since OTE
employees would have to consent to losing their life
tenure employment
in exchange for a lower
redundancy compensation. Nor could it have abolished
retroactively the permanent status of its employees in
order to be able to carry out a mandatory redundancy
scheme since, as the Greek authorities explained, such an
option would have raised very serious legal and constitu­
tional issues that would have defeated the whole restruc­
turing of OTE.

(115) Moreover, an analogy could be drawn between the
present case and the Commission’s Communication on
stranded costs in the energy sector (48). Stranded costs
arise when the incumbent retains costs associated with
being an incumbent supplier but is no longer able to
recuperate them because new competitors are now
servicing the market as a result of liberalisation.

(116) Thus, the Greek State’s contribution to the VRS could by
analogy be treated in a similar manner as the compen­
sation for stranded costs, for the following reasons. The
special permanent status of OTE’s employees is linked to
the previous monopoly situation where the market was
not yet liberalised. This special regime did not give rise to
any difficulty as long as OTE operated in a monopoly
environment. OTE incurred higher costs as compared to
others, but
shielded from any intra-industry
competition. Since the liberalisation of the Greek tele­
communications market,
employee
arrangement has gradually become a burden for OTE,
affecting its competitiveness. The specific permanency
status,
of
represents an additional wage cost
its
competitors do not have to bear (49).

the quasi-civil-servant

the employees,

for OTE that

specific

it was

this

i.e.

In EDF,

(48) See above, footnote 17.
(49) Reference should also be made to the Commission’s decision in the
EDF case (see footnote 16).
the Commission declared
compatible a measure whereby the French State relieved enterprises
in the French electricity and gas sectors of the payment of some of
the specific pension rights the employees had acquired in the past,
at a time when companies were operating under a legal monopoly.
The Commission considered that at that time the companies were
shielded from any intra-industry competition and could thus bear
the higher pension rights without
suffering any significant
economic disadvantage. The Commission acknowledged that these
‘past liabilities’ represented a significant difficulty for these enter­
prises, once they were operating in competition with other elec­
tricity or gas enterprises that did not have to bear similar costs
from the past
the Decision). The Commission
regarded the aid granted ‘with the view to such sectoral reorgani­
zation’ as necessary and proportionate on the grounds that the
other aspects of the sectoral reform did not involve any State aid
(recital 146 of the Decision). Although in the present case the
Greek State does not compensate OTE for past pension liabilities,
nor is the measure aimed at a wider sectoral reorganisation, the
principles laid down in EDF are applicable by analogy.

(recital 143 of

(117) Accordingly,

the VRS that

the decision of

the Greek authorities to
finance the costs of
from the
permanency costs and the high salaries of OTE is in
line with the necessity requirement, for it enables OTE
to restructure its operations in a manner similar to that
of a private company without having to incur the extra
costs that derive from the pre-liberalisation period.

result

c. Proportionality

(118) The State’s contribution compensates OTE only for the
permanency and high salaries costs that arise from the
extra notional years that are given to employees who
would have reached the mandatory retirement age from
2005 to 2012. In particular, the Greek State does not
intervene to finance the existing pension liabilities of
that
OTE or
should have been assumed by the company. OTE has
paid all its past employer contributions to TAP-OTE in
full, and is also paying all the costs of the VRS, up to the
effective date of the implementation of the VRS, with the
exception of the costs that a private company would not
have to bear had it had to take similar measures to
reduce its workforce.

to cover any sort of pension deficit

(119) Thus, the Greek State is transferring 4 % of its stake in
OTE into the pension fund in order to finance the costs
of the VRS that result from the fact that the pensions of
those eligible for the VRS are not calculated on the basis
of the year of their actual departure, but on the basis of
the year they would have retired had they chosen to take
full benefit of their permanent status. In other words, the
State is essentially financing the future employer and
that correspond to the notional
employee pensions
years being awarded to those taking advantage of the
VRS offer.

(120) The State’s contribution should also be assessed within
the wider agreement reached by the management of OTE
and its employees whereby in exchange for the generous
incentives given for early retirement, OTE employees
the permanent
have consented to the abolition of
employment
the
employment status of OTE future employees remained
unchanged, the State’s contribution would not have had
any effect on the company’s long-term viability since any
future recruits would have neutralised any short-term
cost savings that OTE would have realised through the
VRS.

recruits. Had

future

status

for

(121) The proportional character of the aid in question also
depends on ascertaining first that (a) the Greek authori­
ties have adequately quantified the extra costs that the
OTE will have to bear because of the permanency and
high fixed salaries of the personnel taking advantage of
the VRS offer, and (b) that the State’s contribution does
not overcompensate OTE.

L 243/22

EN

Official Journal of the European Union

11.9.2008

i. T h e e x t r a c o s t s o f O T E

(122) On the basis of the detailed information submitted by the
Greek authorities,
the VRS, as
certified by KPMG in accordance with the certified IFRS
Financial Statements of OTE for 2005, is EUR 1 161,8
million.

the nominal costs of

(123) According to the study carried out by CRA International
(see recital 65), the NPV of the VRS is EUR 1 086,2
million. Taking into account the tax benefits to OTE
arising from the deductions to be made for corporate
tax purposes, CRA International has estimated the post-
tax NPV of the VRS at EUR 784,3 million.

(124) CRA International has based the calculation of the NPV
on a discount rate of 3 %, which corresponds to the
return of risk-free securities. This approach contrasts
with the November 2005 submissions of the Greek au-
thorities which were based on the WACC of OTE,
estimated at 7,8 %. CRA International does not deny
that
It
the WACC can be used as a discount rate.
considers, however, that while the use of the WACC
reflects the usual risk to which a company is exposed
in the present case the
in the course of its business,
payment of salaries and pensions to OTE employees is
devoid of any uncertainty,
for salaries follow a strict
salary scale and their yearly ‘upward’ revision is not
performance.
correlated
own economic
However,
for the sake of completeness, CRA Interna­
tional also calculates the NVP of the VRS by reference
to the WACC of OTE and concludes that the NPV of the
VRS is EUR 704,8 million.

to OTE’s

(125) The Commission considers that an assessment based on
the WACC of OTE (7,8 %)
is in line with general
practices in this area (as also acknowledged by CRA
itself) and with the Greek authorities’
International
earlier submissions. Accordingly, the NPV of the VRS
should be EUR 704,8 million.

(126) Based on the assumption that OTE could provide an
early retirement package equal to 150 % of the legal
requirement for a redundancy, but with private salaries
(in other words 33 % lower than those of OTE), CRA
International concludes that the NPV of such a scheme
would be EUR 314,4 million. It follows that the extra
burden on OTE is EUR 390,4 million (EUR 704,8 – EUR
314,4 = EUR 390,4).

(127) At

the

formal

investigation,

the opening of

the
to provide
Commission asked the Greek authorities
the proposition that private companies
evidence for
would have offered redundancy packages
to
150 % of the minimum legal requirements. The Greek
authorities submitted a report by the Hay Group (see

equal

to the

conclusion that,
recital 61), which came
although there had not been any kind of VRS in the
EU comparable to that of OTE, based on interviews
and information gathered by 40 companies operating
in Greece, on average the redundancy package offered
by private companies to employees aged 51 to 62 (the
majority of OTE employees taking part in the VRS) was
equal to 150 % the legal minimum requirement. Having
examined the relevant
information submitted by the
Greek authorities, the Commission has no grounds to
call
the
Hay report.

into question the validity of

the findings of

(128) Therefore, the calculation by CRA International of the
extra burden of OTE (EUR 390,4 million) based on the
1,5 multiplier suggested by the Hay report should be
accepted as well-founded.

(129) The next question that needs to be answered is whether
the Greek State’s contribution exceeds the extra burden
for OTE, estimated at EUR 390,4 million.

ii. T h e v a l u e o f

t h e G r e e k S t a t e ’ s c o n t r i ­

b u t i o n

(130) Pursuant to Article 74(4)(a) of Law No 3371/2005, the
Greek authorities contribute 4 % of the share capital of
OTE to TAP-OTE. The value of the Greek State’s contri­
bution to the VRS is calculated by multiplying the total
number of shares of OTE (490 582 879) by 4 % and by
the share closing price of OTE, as quoted on the Athens
Stock Exchange (50).

(131) On the date of the publication of Law No 3371/2005
(14 July 2005), the closing price of the OTE share was
EUR 16,35. At that date, the State’s contribution corre­
sponded to around EUR 315 million. Since then, the
share price of OTE has gradually increased, fluctuating
from EUR 23 in mid-January 2007 to EUR 21 on
27 February 2007. Thus on 27 February 2007,
the
value of
the Greek State in
OTE stood at around EUR 410 089 618.

the 4 % shareholding of

(132) The value of the Greek State’s contribution at that date
was higher than the amount corresponding to the extra
burden of OTE (EUR 390,4 million).

(133)

In its reply at the opening of the formal
investigation,
given the impossibility of predicting the future closing
price of the OTE share, the Greek authorities formally
undertook to repeal Law No 3371/2005 should the value
of
the 4 % stake exceed the amount of EUR 390,4
million on the day of its transfer to the pension fund
and to take any other necessary measure to ensure that
the value of the shares to be transferred to TAP-OTE
would not exceed EUR 390,4 million.

(50) Namely, 19 623 315,16 × OTE share price.

11.9.2008

EN

Official Journal of the European Union

L 243/23

(134) Accordingly, the Commission’s assessment in the present
case is based on the undertaking given by Greece that its
envisaged contribution to TAP-OTE will not exceed the
amount of EUR 390,4 million that corresponds to the
extra costs of the VRS for OTE, and that, if necessary, it
will also repeal Law No 3371/2005.

1. Other advantages

(135) At

formal
investigation the
the opening of
the
Commission observed that
the additional costs borne
by OTE owing to the special employment status of its
employees would not necessarily justify the State’s contri­
bution, given that OTE might have benefited, and may
from other
continue
advantages which
to benefit,
neutralise the cost of
the VRS (see recital 47). Such
advantages could arise from the specific employment
status of OTE employees,
in general, or specific inter­
ventions, reducing OTE’s labour costs below the labour
costs of companies subject to the generally applicable
labour laws, such as exemption from unemployment
charges or relief from pension obligations. OTE might
also derive benefits from its former monopoly position,
compensating for the disadvantages resulting from the
extra costs of the VRS (in particular as regards its fixed
telecom network).

a. Labour-law-related advantages

(136) The Commission now considers that the compatibility
assessment under Article 87(3)(c) of measures that aim
to compensate an ex-monopolist
for the extra costs
arising from a period when the company concerned
operated
to
examining whether
the company has benefited, or
continues to benefit, from other advantages of a similar
nature (such as, in the case at hand, other labour-law-
related advantages enjoyed by OTE) which may neutralise
the costs in question.

a monopoly

limited

should

be

as

(137)

In this regard, the report by Prof. Levantis commissioned
by the Greek State concludes that OTE does not benefit
from any kind of labour advantages, and that for the rest,
OTE is subject to the general labour law framework like
any other public limited company. Moreover, the Greek
authorities have
the
Commission at the opening of the formal investigation,
that OTE, like any other employer in Greece, is subject to
the payment of unemployment insurance contributions
in accordance with the applicable social security legis­
lation.

confirmed,

requested

by

as

(138) At

the

the opening of

the
Commission also queried whether OTE had in the past
benefited from a relief
from its pension liabilities.
According to the information submitted by the Greek

investigation,

formal

authorities, OTE has never been exempted or relieved
from its pension obligations as an employer (51).

b. Competition-related advantages

(139) The Commission considers that

the question whether
account should also be taken of other advantages that
derive from the previous monopoly position of
the
undertaking concerned depends, in essence, on whether
the relevant market has been fully liberalised, in the sense
that an appropriate legal or regulatory framework exists
to ensure that an ex-monopolist no longer enjoys any
exclusive or special rights or other privileges, and that
actual or likely distortions of competition can be dealt
regulatory
with effectively under
the
remedies and/or under the expost enforcement of
relevant competition law provisions.

the available exante

(140)

essentially on the

in its submissions, the third party has
In this respect,
focused
anticompetitive
alleged
behaviour of OTE on the fixed voice market and the
alleged failings of the national regulatory authority to
carry out its regulatory duties.

(141) The Commission notes that in accordance with Articles 7
the European
and 13 of Directive 2002/21/EC of
Parliament and of the Council of 7 March 2002 on a
common regulatory framework for electronic communi­
cations networks and services (Framework Directive) (52),
the national regulatory authority has already designated
OTE as having significant market power within all fixed
markets that are included in the Commission Recom­
mendation on relevant markets. As a result, OTE is
currently subject to a set of integrated ex ante regulatory
remedies both at wholesale and retail level. In particular,
OTE is today obliged to provide third parties with: (a)
wholesale access to its fixed network, (b) carrier selection
and carrier pre-selection, (c) transit services and a whole
set of network services complying with the principles of
fairness, reasonableness and timeliness. As an operator
with significant market power in the fixed line market,
OTE also has an obligation of non-discrimination, trans­
parency, accounting separation and auditing and is
to an obligation of price control and cost
subject

(51) Quite the reverse, by a series of legislative acts from 1994 to 2001
(Laws No 2257/1994, 2768/1999, 2843/2000 and 2937/2001),
the Greek State required OTE to make certain ad hoc (capped)
the pension fund’s
payments to TAP-OTE in order
operating deficits. More particularly, in 2001 OTE was obliged by
law to pay a lump sum of GDR 120 billion (around EUR 4 billion)
to cover TAP-OTE’s deficits calculated for the years 2002-2011.
Since OTE had no obligation whatsoever
the
viability of TAP-OTE, these were payments made over and above
OTE’s own pension contributions as an employer.

to guarantee

to cover

(52) OJ L 108, 24.4.2002, p. 33.

L 243/24

EN

Official Journal of the European Union

11.9.2008

accounting based on long-run average incremental costs
on the basis of current costs of assets (53). These remedies
are also to be found in the regulation of the leased lines
markets (54) and the market
for wholesale broadband
access (55). Furthermore, the NRA has imposed on OTE
local loop unbundling (LLU) prices which are at present
the lowest in the EU.

advantages for OTE resulting from its previous monopo­
listic position that are not dealt with by the framework,
and in any event, no such quantifiable advantages have
been found by the Commission or indicated by a third
party.

(142) Overall,

the various cost accounting and accounting
separation obligations imposed on OTE aim to ensure
that OTE as a former monopolist should derive no
advantage capable of undermining or distorting compe­
tition on the market (56).

c. OTE’s exemption from the advertisement tax

(145)

In its submission, the third party stated that OTE has
been exempted from the payment of the advertisement
tax that other companies have to pay for every adver­
tisement they place on any medium. The Commission
in principle such measures should be
considers that
this
examined separately and not
procedure. The Commission is satisfied that
in any
event the exemption has not procured any advantage
to OTE (58).

in the context of

(143) The Commission further notes that since the opening of
the formal
the NRA has also taken a
number of ex post measures against OTE because of
violations either of
the existing regulatory framework
or of the competition law provisions (57).

investigation,

2. Concluding remarks

(144)

In the light of all the above considerations,
it appears
that the existing sectoral regulatory framework already
ensures to a large extent that the electronic communi­
cations market operates properly and that there are no

(53) See Commission Decisions (no comments), Case EL/2006/0493:
call origination on the public telephone network provided at
fixed location, Case EL/2006/0494: call origination on individual
public telephone networks provided at fixed location, and Case
EL/2006/0495:
in the fixed public telephone
network. http://circa.europa.eu/Public/irc/infso/ecctf/library?l=/
ellda/adopted_measures&vm = detailed&sb = Title
comments) Case

(54) Commission Decision (no

EL/2006/0372:

services

transit

wholesale broadband access in Greece.

(55) Commission Decision (no comments) Case EL/2006/0491:

the

minimum set of leased lines in Greece.

(56) Pursuant to Article 7(3) of Directive 2002/21/EC, the Commission
has also examined the above mentioned decisions and remedies
imposed by the regulatory authority on OTE and has not
expressed any serious doubts as
to their compatibility with
Community law and in particular with the objectives referred to
in Article 8(2)(b) of the Framework Directive, including the obli­
gation on national regulatory authorities to ensure, through their
decision-making powers ‘that there is no distortion or restriction of
competition in the electronic communications market’.

(57) Thus, on 29 November 2006, the regulatory authority fined OTE a
total of EUR 3 million, that is EUR 1 000 000 for breach of the
existing regulatory framework (carrier pre-selection) and EUR
to
2 000 000 for an abuse of a dominant position (refusal
provide network access,
leverage of market power, and abuse of
a relation of economic dependency). Finally, on 2 March 2007, in
the context of an injunction relief procedure, the authority issued
two temporary orders, following a request filed by a number of
alternative providers which OTE threatened with interconnection
interruption, invoking the fact that these providers allegedly owed
OTE significant debts. The measure temporarily prohibits OTE from
interrupting the interconnection until the authority has decided on
whether OTE’s claims are founded in the context of a dispute
settlement procedure in accordance with the current regulatory
framework. See press release issued by EETT on 2 March 2007.

(146)

(147)

and

high

status

It follows from the foregoing that as long as it does not
exceed the extra burden imposed on OTE due to the
permanent
its
the
employees, the planned contribution of the Greek State
to the costs of the VRS of OTE, calculated at EUR 390
million, is an aid measure which pursues an objective of
common interest in a necessary and proportionate way
without adversely affecting trading conditions. Therefore,
it is compatible with Article 87(3)(c) of the Treaty.

salaries

of

VIII. CONCLUSION

that

repeal

they will

It should be stressed that this Decision has been drawn
up on the basis of the explicit undertaking given by the
Greek authorities
Law No
3371/2005 if on the date of the transfer to TAP-OTE
of their 4 % shareholding in OTE the value of the shares
thus transferred exceeds the extra costs of the VRS of
OTE as verified and accepted by the Commission. The
Commission has accordingly come to the conclusion that
the extra costs of the VRS to OTE due to the life tenure
employment status and high fixed salaries enjoyed by its
staff amount to EUR 390,4 million.

(58) As the Greek authorities have confirmed, even if it is true that OTE
did not pay the tax in the past, it has always been in the same
telecommunication
position as its competitors since no other
service provider was liable to pay the tax under Greek law.
In
accordance with Article 19(2) of Law No 1264/1982, public under­
takings or utilities were exempted from the payment of the adver­
tisement tax. In 2005, the Administrative Court of First Instance
(Decision No 9564/2005), ruled that the notions of ‘public service’
and ‘utilities’
in Law No 1264/1982 should be interpreted as
meaning that any licensed telecoms operator providing telecommu­
nications services is eligible for exemption from the advertising tax
irrespective of its status as a public or private company. As a result,
the exemption did not put OTE in any advantageous position vis-à-
vis its competitors.

11.9.2008

EN

Official Journal of the European Union

L 243/25

(148) On the basis of

the undertaking referred to,

the
Commission finds that the notified measure, examined
in conjunction with the relevant case-law, including the
Combus judgement, can be regarded as aid. However, the
matter does not need to be pursued further as, even if it
is assessed as aid, it is in any event compatible with the
common market pursuant
the
Treaty,

to Article 87(3)(c) of

Should the value of the 4 % shareholding of OTE that the Greek
State is planning to transfer to TAP-OTE exceed, on the date of
the transfer, the amount of EUR 390,4 million, Greece shall
take all necessary measures to ensure that TAP-OTE will not
receive any amount in excess of EUR 390,4 million.

Article 2

This Decision is addressed to the Hellenic Republic.

HAS ADOPTED THIS DECISION:

Article 1

Done at Brussels, 10 May 2007.

The 4 % shareholding in OTE that the Greek State is planning
to transfer to TAP-OTE, provided that its value does not exceed,
on the day of the transfer, the amount of EUR 390,4 million,
constitutes aid which is compatible with the common market
within the meaning of Article 87(3)(c).

For the Commission

Neelie KROES
Member of the Commission