OTE divided over next move

An internal tussle is reportedly taking place at the OTE telecom group over the launch of its combined fixed-line/mobile service in response to increasing competition. The Vodafone group was the first to recently launch a fixed-mobile service in Greece, with an advertising blitz, and Wind Hellas, the third-largest mobile operator, is expected to present its own scheme soon. The disagreements at OTE center on whether the final product will be launched by the parent company itself or its mobile operations subsidiary, Cosmote, with each side proposing that it buy wholesale capacity from the other. OTE officials argue that the parent company has the rightful higher hand, especially given the fact that 70 percent of any profits ceded to the subsidiary from the new activity will go to the shareholders of OTE anyway (as it controls 70 percent of Cosmote) while the rest will be dispersed. For their part, Cosmote officials point out that OTE, as the dominant player in the telecoms market, will be subject to stronger regulation pressures than its subsidiary. They argue that OTE services are scrutinized more stringently by the Telecommunication and Post Commission (EETT), while Cosmote packages would be approved more easily. Moreover, they add, if Cosmote «opens up» its network to the parent company by offering wholesale services, it will have to offer the same terms to OTE’s alternative fixed-line competitors due to transparency. In turn, this would open up the market of Mobile Virtual Network Operators (MVNO), which would intensify competition and be beneficial to consumers but detrimental to Cosmote’s profits. To date, Greece’s three main mobile operators, with Cosmote in the lead, have zealously guarded their networks against the entry of newcomers. The dispute seems to vindicate group president Panagis Vourloumis, who has long argued that the group should hold a single share, instead of two, as it does at present. If OTE were in full control of Cosmote, it would be immaterial to its shareholders which of the two would respond to the competition war launched by Cosmote. Nevertheless, the problem is of key significance for the efficiency of the group, as it appears unwieldy and hesitant at a time when competition is heating up. The climate on the Greek telecoms market has changed drastically since the new owner of Wind Hellas, Naguib Sawiris, launched an aggressive drive to increase its market share earlier this summer. Vodafone has since responded with packages for fixed-line and mobile telephony as well as broadband Internet. Finally, about half a dozen smaller alternative operators are contesting the flourishing broadband market, making life for OTE even more difficult. Vodafone’s launch of the fixed-line/mobile service has reportedly done very well, having attracted about 10,000 customers, against the initial target of 700 its the business plan.