OTE rings bell over profit drain

Growing market losses in the fixed-line phone sector and the government’s failure to stop treating the country’s biggest enterprise as if it were still a state monopoly have locked OTE Telecom in a steady profit drain, the company’s new CEO told shareholders yesterday. Addressing the telecom giant’s annual general assembly, Panagis Vourloumis warned that «soon, the company will face severe problems unless the situation is brought under control.» Vourloumis, who took over in May following the change of government in the March 7 elections, told shareholders that profits, in steady decline since 2002, are expected to fall further this year. In the first quarter of 2004, OTE’s income dropped 56.6 percent year-on-year as a result of increased costs – in combination with strong competition with new companies in the fixed-line sector that has resulted in a price war. «Since 2001, OTE has been operating in an environment of tough competition, while at the same time retaining the internal organization and the mentality of a state monopoly,» Vourloumis said. «This translates into high, inelastic operating costs.» But the CEO allowed a glimmer of hope, citing the recovery of other European state telecoms monopolies from similar difficulties. «I am certain that the trend can be reversed provided the management and the personnel cooperate closely,» he said. Nevertheless, Vourloumis gave a 12-month deadline for the 170-million-euro Hellas SAT telecommunications satellite consortium – launched a year ago with Cyprus’s state telecom company – to be brought around or closed down. The venture is costing OTE 10 million euros a year in operating bills.