ECONOMY

OTE’s telecoms competitors should consider mergers to ensure market share, profitability

Alternative telecommunication providers’ results for 2004 highlight the need for mergers leading to stronger and more viable companies in the sector. Nearly half of the companies in the market recorded losses last year, attributed to amortizations of the investments made to strengthen their networks and to the small profit margins in voice telephony. The combined losses of three of the sector’s most important companies – Lannet, Altec Telecom and Vivodi – reached 22 million euros in 2004. But the financial data of alternative providers show the good market share they have obtained against former state-owned monopoly telecom OTE. Yet company managers know well that their long-term viability will only be secured through a substantial regulatory intervention in the market – for instance, the actual unbundling of local loops, where OTE keeps raising obstacles – and through alliances for investments on network infrastructures. Through local loop unbundling, alternative providers will be able to gain direct access to consumers and have the ability to provide added-value services with greater profit margins. Today, alternative providers reach consumers through the OTE network that controls the so-called «final mile.» Through alliances, stronger business schemes will emerge and will be able to attract foreign or domestic capital, analysts say. The current picture in most players’ financial reports is exceptionally discouraging for those wanting to buy into the Greek telecoms market. Mergers are the only way, then. In Greece there are about 20-25 fixed and mobile telephony companies operating, while in most European countries the strong players are fewer than 10. Alternative providers attribute the delay in the market’s maturing to the unclear regulatory framework, which OTE exploits through its former monopoly. Its management is using the argument that alternative providers have invested very little in funds for the creation of owned network infrastructure and rely on OTE’s network instead. In the past alternative telecoms discussed the possibility of cooperating for the installation of an fiberoptic network, for instance, but without significant progress to date. Many of them do realize investments in infrastructure through own capital and slow procedures. They also accuse OTE of considerable delays in local loop unbundling and blame the firm for problems such as the installing infrastructures at OTE buildings. Some claim there is a way to get around the former monopoly, through the potential offered by wireless technologies such as Wi-Max. But installing a Wi-Max network requires antennas, and the problems mobile telephony companies face with putting up antennas in Athens are well known. This year will determine many things: Firstly, the new bill about telecommunications will soon become law, so that many problems seen in the past will be solved, at least in theory. Secondly, there is hope that after the completion of the restructuring of OTE, changes will be made to the corporation’s commercial policy, which is deemed to be the main culprit for the primitive state of the domestic telecoms market, mainly through its insistence on raising obstacles against the competition instead of changing its own ways.