ECONOMY

Small, saturated market hampers telecoms investors

Greece’s telecommunications market is not expected to present any significant changes in the short to medium term and the main operator, OTE, will continue largely calling the shots, according to the annual report of Kantor Capital, a subsidiary of Kantor Management Consultants. Kantor specializes in the Greek and international telecoms market, particularly in the field of mergers and acquisitions. According to the report, the Greek market does not present any important investment opportunities in the medium term, and the likely mergers and acquisitions are seen only in relation to OTE’s foreign subsidiaries. The overall picture of the Greek telecoms market, says the report, is quite different from the international scene. Fixed-line telephony remains largely controlled by OTE, due to the particularly high investment required by prospective entrants. The only serious competitor to OTE is Tellas. The report considers it doubtful there will be any significant investment moves, except for possible entry of institutional investors in the smaller market players which hold out the promise of value growth. The Greek mobile telephony market is considered saturated, but the projected increase in the number of users with multiple connections is expected to drive growth. The growth of new services is also expected to bolster demand beyond the voice services segment. The ability of users to retain their numbers while changing connections is a new factor that can influence the market, as it increases their flexibility substantially. Share capital increases are not foreseen, as foreign operators have already effected them. The absorption by OTE of its leading mobile operator CosmOTE, with a view to bolstering its profitability, is feasible but not likely this year or next. No important acquisition is expected in the domestic Internet market in coming years, as the players exclusively active in this segment are very small. In the medium to long term, technologies are expected to converge and telecommunications will be provided through mixed systems; such a trend will encourage acquisitions and absorptions which would maintain a single technological base. According to the Kantor report, the most important trends in the global telecoms market in the next five years are summed up as follows: penetration of new technologies in the less developed countries; stronger competition in voice services; shrinking profit margins due to the stronger competition and telecom services becoming more of a public good; stronger demand for new services (mobile Internet, DSL, 3G). Mergers and acquisitions activity is expected to rise in coming years, as multinationals try to consolidate their position in existing markets and expand into developing markets, and as banks and venture capital funds take a greater interest.