Solid Local Operators Help Telecoms Sector to Ride Out the Global Storm

OTE sees its impressive portfolio of mobile telephony investments overseas as vital for growth.

Greek telecommunications companies have put in a relatively good performance in the face of crumbling profits elsewhere in Europe during the past couple of years. Local operators have proved to be a fairly reliable investment, and free market competition in the industry is obviously paying dividends.

The Hellenic Telecommunications Organization (OTE) is certainly ready for the rigors of the free market. The former state monopoly is now 58 percent in private hands and is at the forefront of development, offering some of the best services around. Institutional investors holding shares in the company come from the U.S., the UK, Germany and other countries.

OTE now faces competition in the local market from the likes of Forthnet, Lannet Communications as well as a proposed deal between DEI (Public Power Corporation) and WIND, an Italian-French joint venture.
The Greek company recently announced a major restructuring program to prepare itself for the demands of the future and a more liberalized telecommunications sector. It is now split into four key business units: OTE Line Market (fixed telephony), CosmOTE (mobile), OTEnet (Internet) and International Ventures (international business).

LEFTERIS ANTONACOPOULOS Vice Chairman of OTE

Lefteris Antonacopoulos, chairman and Chief Executive Officer, is clearly not afraid of the future. A former president of the Federation of Greek Industries, he embraces competition and the benefits that it brings both to the consumer and business itself. He wants to see OTE develop into a modern and upbeat Greek enterprise.
“Competition has already had a benefit for OTE because it forced us to develop our call centers, for example,” he says. “They are a huge success among our customers. This service arose from being forced to respond to the market. The same can be said about CosmOTE, which has achieved a leadership position despite great competitive challenges.”
Although he expects market share will be lost – the DEI-WIND consortium expects 15 percent market share by 2005 using the existing network of DEI – the company is taking action now to protect revenue and profits. As well as restructuring the entire business, the company holds an important strategic edge through its vast and modernized existing network.

“Competition will increase but because of the configuration of the country competitors will have to make very big investments in infrastructure in order to reach the whole market,” he adds.
Mr. Antonacopoulos believes that the company can create the right packages and products that will attract new customers and increase the all-important average revenue per user gauge. Through the restructuring process, it will devolve a great deal of decision-making down to the new individual companies, even those abroad, although it will keep a corporate center responsible for strategy and key issues, such as purchasing, to take advantage of important group synergies.
“We will also centralize purchasing because we want to utilize the purchasing power we have for the group rather than the individual,” he says.

An illustration of OTE’s confidence is its considerable portfolio of mobile telephony investments overseas. In recent years, it has invested some $1.5 billion in the Balkan region although this side of the business still only accounts for about four percent of total group turnover. The company is also active further afield in Jordan and Armenia.
Despite the current difficult business climate, Mr. Antonacopoulos is determined to see the firm’s investments in the Balkans, such as Globul in Bulgaria, pay off over the long term. The company has targeted foreign investments in this area as a key growth driver in the future. Much of the groundwork has already been done.
“In the international market we have a significant presence in the Balkans and we have to continue to do work in these areas in order to improve returns on the capital that we invested,” he says.
Mr. Antonacopoulos thinks the Balkan investments offer good growth potential although it is only one aspect of the group’s focus right now. Consolidation in the home market is equally crucial.
“I think there is potential for growth in all markets within the region,” he says. “We do not have any great aspirations for further growth outside Greece as of now, instead we are aiming at consolidating our position within the domestic market. Our strategy is to give preference to the mobile telephony market abroad rather than fixed line operators.”

After the unsettled period which has rocked profits at most major international telecommunications operators, OTE is perhaps better placed than many. In the domestic mobile sector, for example, CosmOTE has been performing well. At the end of June, it announced that it had increased its total customer base by 28 percent on the previous year to reach more than 3.2 million subscribers, a mix of prepaid and contract services, underlining the healthy growth in the mobiles segment. The firm’s financial results for 2001 – essentially its third full year of commercial operation – were robust as net income tripled and total consolidated revenues shot up by 55 percent over the previous year. It meant healthy dividends for shareholders.
Mr. Antonacopoulos believes that global market conditions will eventually pick up, however. “I think growth will begin in the U.S. and then spread to the rest of the world. It will come but it will be delayed,” he says.
Crucially, he adds, there is a belief that when the telecommunications sector does finally pick up, OTE will be there to reap the dividends.

“As for OTE, we have made practically all our investments, the network is fully digitized and I believe we will remain as successful as we have been so far. We restructured the company because we felt it was a business need. We needed to simplify our structure and make it more efficient both for OTE and for the consumers. We are aiming at providing the best services possible so that we can all profit from this.”
Telecommunications equipment suppliers like Intracom Group are also advocates of competition in the telecommunications sector. It is the largest manufacturer of equipment and information systems in Greece, across southeastern Europe and the Mediterranean region. It has also established a formidable presence in the U.S. through a series of acquisitions and partnerships, including one with Cisco Systems.

Mr. Tzavaras, General Manager of New Business Development at Intracom, agrees that competition is healthy. The company has still been able to post impressive results, despite pressure from major players like Lucent, Siemens and Motorola. “It is not something we fear,” he says.
The company is looking to strengthen its U.S. position, although it also believes it can assist American companies to tap the growing market around southeastern Europe.
“It is hard for us to expand much in the EU market, but we are hopeful about our future in the U.S. market,” he says. “We will make strategic acquisitions where we see a potential for Intracom to expand its customer and product base.”