ECONOMY

OTE Telecom sees profits plunge by 16.9 percent in Q1

Competition from a host of alternative carriers and mobile operators is starting to bite and hard, dominant telecoms operator OTE has found to its detriment. OTE yesterday blamed its rivals for a 16.9 percent drop in consolidated pretax profits to 167 million euros in the first quarter despite a 7.6 percent jump in group revenues to 1.1 billion euros. Consolidated earnings before interest, tax, depreciation and amortization (EBITDA) declined 6.5 percent to 467.1 million euros, with the EBITDA margin dropping 6 percentage points to 42 percent. The sharp fall in pretax profits is due «solely to the intensively competitive fixed-telephony market,» the company said. Its market share dropped to 97 percent at the end of March 31 against a 4 percent market share loss at the end of 2002. It expects its market share loss to reach 25 percent by the end of 2005. Costas Karitsos, telecoms analyst at Kapa Securities, said OTE’s results exceeded expectations, due chiefly to forex gains which it could find hard to repeat. «A large part of net profits came from forex gains which could be non-recurring,» he said. Revenues from domestic fixed-line operations declined 7.1 percent to 491 million euros as subscribers switched to one of an estimated 12 alternative carriers with their cheaper rates. A rate cut earlier this year by OTE and fixed-to-mobile substitution also contributed to the revenue drop. International traffic was similarly affected as competition chipped at earnings, slashing it by 15.6 percent. OTE’s efforts to strengthen its Internet operations appeared to be paying off as Internet service provider OTEnet reported a 163 percent jump in pretax revenues on revenues of 13.3 million euros, up 34 percent. OTE’s personnel costs rose 8 percent. The work force is expected to be slimmer by 1,030 through natural attrition and voluntary redundancies. Overseas operations posted mixed results, with Albanian mobile subsidiary AMC reporting a deeper loss as Romtelecom returned to the black. OTE said it was in discussions with rating agencies to avert a downgrading after Moody’s and Standard & Poor’s placed the operator on review. The move came after Romanian mobile company Cosmorom failed to pay its creditors.