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VIENNA, April 17 (Reuters) - An agreement between Carlos Slim's America Movil and the Austrian government to take joint ownership of Telekom Austria is likely to be agreed next week despite a public war of words that broke out on Friday.
The government holding company OIAG will decide on Wednesday whether to pool its 28 percent stake in Telekom Austria with Slim's 26 percent, triggering a joint takeover offer and potentially handing Slim control of the company.
The two parties are thrashing out final details of a syndicate agreement, which will ensure the company's headquarters remain in Austria and that no major decisions are taken without the approval of the government.
In return, Slim - who failed in a takeover attempt of Dutch KPN last year - could become Telekom Austria's biggest shareholder through a rights issue, allowing him to consolidate the company's results as he seeks growth outside Latin America.
Slim has said he will invest about 1.5 billion euros ($2.1 billion) in Telekom Austria if the deal goes through. Austria, grappling with huge and unpopular subsidies for failed bank Hypo Alpe Adria, is strapped for cash.
The influential head of Vienna's Chamber of Labour has spoken out against the planned syndicate deal, arguing that Austria should have the political will to put its own money into its key industries.
Still, the OIAG's supervisory board, which will make the decision, has only five labour representatives out of 15 members - the rest are capital markets representatives - meaning chances are slim that the deal will be rejected.
A source familiar with their thinking said the labour representatives had not yet decided whether to vote against the deal or abstain, and that the decision would be taken after they had seen the final syndicate agreement on Tuesday.
The OIAG has said it will keep a blocking minority of 25 percent and one share in the company but has not said it will keep pace with Slim in any capital increase.
Slim's arguments have won over some important conservative politicians: the country's finance and economy ministers have cautiously welcomed the deal.
On Friday, Austrian magazine Profil published details of a letter written by Ronny Pecik, who represents America Movil on Telekom Austria's board, warning that the company was in a "death spiral" and desperately needed money.
The letter said Telekom Austria faced the same fate as Austrian Airlines, which was taken over by Lufthansa in 2008 at a cost of 500 million euros to Austria.
"We will reduce the debts by injecting cash," said the letter, which was also seen by Reuters. "We will invest in the domestic structure more than until now."
The Chamber of Labour shot back with a statement accusing Pecik of scaremongering and unjustly talking down the company. "The question arises of whether someone might want be trying to buy the company as cheaply as possible," it said.
Telekom Austria, which was burdened by a billion-euro payment for mobile frequencies and a 390 million-euro acquisition last year, had net debt of 3.7 billion euros at the end of 2013.
Its revenues and profits have been declining for years amid tough Austrian competition and European regulation of fees such as roaming charges, but it hopes to stabilise its domestic business this year following consolidation of the market.
The company says it has no capital needs to cover its ongoing operations but would need new financing such as a rights issue to fund major expansion or acquisitions. ($1 = 0.7243 Euros) (Reporting by Georgina Prodhan; editing by Tom Pfeiffer)