Alternative fixed-line providers are cheap, but few will survive

The use of alternative fixed-line telecom operators can reduce costs up to 70 percent, but the quality of service is frequently found to be inferior to that of main provider OTE, the Foundation for Economic and Industrial Research (IOBE) said in a sectoral study. Nevertheless, IOBE notes that the situation is improving, as the alternative operators are using better technology and looking forward to lessening their dependence on OTE’s leased lines and acquiring their own networks. However, IOBE points out that the fixed-line market segment is showing signs of saturation, illustrated by a stagnant client base and the strong competition from mobile telephony which is leading to declining prices and slimmer profit margins. The number of fixed-line connections recorded an average annual growth rate of only 1.18 percent in the 1994-2000 period, against a respective 39.55 percent in the mobile market segment. The figure, however, IOBE notes, does not take into account the gradual deregulation of the fixed-line sector, which has effectively progressed in the last two years. In the 1998-2001 period, the Greek telecommunications sector as a whole showed an average annual revenue growth fives time that of fixed-line telephony, which was 0.17 percent – against a respective 2.53 percent average in the member countries of the Organization for Economic Cooperation and Development (OECD). The structure of the Greek market is oligopolistic, led by OTE, which retains the largest market share despite the deregulation. Nevertheless, pressure from competitors is growing, eroding OTE’s base. The most important factors impeding the entry of new operators into the market include the small size of the market, the existence of economies of scale and the absence of «healthy» competition regulations, IOBE says. The combined turnover of fixed-line operators grew at an average annual rate of 4.2 percent between 2000 and 2002, from 3.2 billion euros to 3.5 billion. Finally, IOBE projects a decline in the market penetration growth rate of alternative operators, which will tend to fall to zero as competition intensifies and the survival of new entrants looks doubtful. Characteristically, market sources take the view that few of the presently active operators will survive, as the small size of the market cannot maintain their present number.