ECONOMY

Romtelecom overhaul will boost profit: CEO

BUCHAREST – Romania’s main telecoms operator, Romtelecom, is aiming for a boost in profitability this year under an overhaul prescribed by majority owner OTE Telecom, Romtelecom CEO James Hubley said yesterday. The cash-strapped carrier, whose problems include outdated billing systems, fierce competition on international call tariffs and a struggling mobile unit, has been compelled to rein in costs by OTE Telecom, which upped its stake to a controlling 54 percent earlier this year. Hubley told Reuters the company was aiming for an improvement in EBITDA (earnings before interest, tax, depreciation and amortization) margin and would also slash its work force to improve performance levels. «We expect to be on track (with the EBITDA margin) this year at 30 percent,» Hubley said. Romtelecom’s EBITDA margin was 22.3 percent in 2002, slightly up from 2001’s 21.3 percent. Romtelecom is also aiming for an EBITDA margin of 40 percent in 2005, by which time it plans to increase its efficiency by having around 290 phone lines per employee from 180 this year. Hubley said around 3,500 people were laid off in the first six months of 2003 and the target for overall redundancies this year was 6,000. Romtelecom’s work force was 31,000 at end-2002. «My target is, by the year 2005, to have attained performance levels comparable to Western and Central European telecoms,» he added. Hubley said restructuring Romtelecom also meant reforming the company’s operations by investing in infrastructure and software and rebalancing tariffs. He said rates for international calls, where competition is toughest since Romania liberalized the telecommunications market this year, would go down by 30-40 percent, while line rental, among the cheapest in Europe, would cost 20 percent more. He said a decision would be taken later this year on the fate of Romtelecom’s mobile phone unit CosmoRom, which has market share of under 2 percent and liabilities of around 190 million euros, adding it was «a burden» for the operator. OTE has said it would shut down CosmoRom but wants to keep the mobile telephony license, angering the Romanian government, which said Romtelecom would lose its mobile license. Hubley saw room for growth in Romania’s fixed-line telephony market, where penetration is around 20 percent. Investment, he said, would concentrate on improving services and networks in big cities, rather than on providing service across the country.