Greece’s Telecom Market: A Reality Check (part II)

In a previous post I briefly reviewed on the most important players that didn’t make it in Greece’s telecommunications market. In this post I will present some of the most exciting developments for the players that are still in the game, how their strategies are shaped and what future actions are anticipated. Although many analysts forecast that no more than 3 or 4 players will stay in the market (a projection underpinned by the market structure in mobile sector) we witness an increased activity by all remaining players summoning resources and redesigning their operational and firm structures for the next days. However, 3 major groups are starting to form. It remains to be seen how the rest of the competition will react and how the anticipated market concentration will resolve.

Three Major Groups are Forming…

OTE , the national incumbent has been aggregating all of the organization’s activities to an umbrella group for some time now. OTE Group today is comprised of OTE (fixed telephony and physical infrastructure), Otenet (Internet services), VoiceNet (IP telephony), Cosmote (3G mobile operator), OTEGlobe (international capacity wholesaler) and other smaller primarily consulting units of the mother company. OTE is also operating OTEShops , a retail chain of 125 stores. However, after the acquisition of Germanos, a very successful telephony retail chain with 425 stores nationwide, the group is planning on shutting down OTEShops. According to the Group’s announcement OTEShops contribute only 3% of the Group’s total sales and their operation is duplicating with the successful Germanos chain. Last week, Deutsche Telecom has finalized the acquisition of a 25%+1 share of the company. Now, DT and the Greek government control 50%+2 of the organization. According to the agreement between DT and the Greek government, DT is expected to take operational control of OTE in January.

Vodafone , is the second largest mobile operator (32.04% market share) in the country after Cosmote (40% market share). Since mid-2007 the company has implemented a partnership agreement with Hellas Online (HOL) to offer fixed broadband services using HOL’s private telecommunications network. HOL’s broadband services under the Vodafone brand proved remarkably successful. This alignment is expected by many analysts to create the second competitive pole in telecommunications market in the country. HOL is 100% owned by Intracom Holdings since early 2006 when Eurobank sold the company to its new owner. HOL is a public company since July 2008 through its merge with Unibrain (which was already been traded in stock exchange market). HOL operates an extensive fibre (backhaul & access) network. According to the company’s recently released data HOL has invested 152ml euros in infrastructure and the network’s length is 3500Km. HOL has installed equipment (physical collocation) in 152 of OTE’s central offices (CO) and is offering services through its telecommunications network to 84 cities in 44 out of 52 prefectures of the country. These numbers make HOL’s network the second largest in the country in terms of population coverage. HOL comes third in LLU market with 91,000 subscribers. HOL expects for a positive EBIDTA for 2009.

Wind , is the third largest mobile operator (27.96% market share) in the country. Last year, the company acquired Q Telecom, the fourth mobile operator in the country, which targeted price sensitive consumer market. It has also acquired Tellas , one of the major fixed operators in the country that accounts for 150,000 LLU connections out of approx. 555,000 connections in total. The acquisition of Tellas is estimated to complete by 31/12/2008. Wind has in total more than 400 sales points that serve both Wind and Tellas customers and gives to the group a significant competitive advantage. They are both indirectly controlled by the ambitious Orascom Group . The synergies already in place provide the opportunity for bundled offers and direct competition with OTE Group and Vodafone-HOL offerings. Lately, an agreement on commercial level has been made public between Marfin Investment Group (MIG) and Wind Group that aims at facilitating bundled or combined offers between the telecommunications products of Tellas Group and the products of other firms controlled by MIG. MIG’s IT branch, Singular Logic is expected to develop wide cooperative activities with Wind Group. It is worth noting that MIG owned 20% of OTE which was sold to DT and enabled the German telco to negotiate the OTE package with the Greek government.

…and the Rest are Preparing for Battle (?)

Apparently, the rest of the competition will not give up easily. Why should they? Forthnet is is the oldest of all telecommunications operators and is currently in the first place of LLU market accounting for 177,000 connections. The company has made significant investments in physical infrastructure extending the network reach to the best part of OTE’s CO available for physical collocation. What marked the spot was this year’s acquisition of media companies NetMed N.V. and Intervision (Services) B.V, an investment that summed a little less than half a billion (0.5bn) euros. The market waits to see how NetMed offerings will be integrated with Forthnet’s telecommunications services. Forthnet has also aggressive plans to reach 100 points of sales by the end of 2008. Forthnet is the largest alternative fixed operator in the country and continues to widen their market share (although recently HOL catches up on new customers/month rates – unfortunately no indication is available on customer churn). The company is expecting a positive EBIDTA in the second semester of 2008. Forthnet is publicly traded in the Athens Stock Exchange (ASE).

On Telecoms came late in the market; however a huge marketing campaign helped the company achieve a significant market share in a very short time and today accounts for 90,000 LLU connections. The company is also planning to go public by merging with Zenon Group which is currently traded in ASE. A final note about the company’s plans is the announcement that a network redesign is in progress to enable the company to offer SLA services to business customers. There have been some rumours earlier this year that Forthnet and On Telecoms are planning for a merger but this was denied by the company’s executives.

Vivodi Telecoms is the first telecommunications operator that offered LLU services having in place its private network since 2003, far earlier than the rest of the competition. Vivodi has ever since been the pioneer in service offerings in many respects. The company was made known for its early start in new and innovative services (e.g. LLU, IP Telephony, IPTV, Quad Play). Despite moving quickly to new fields of services the company has never perform well in sales. Currently it accounts for 27,000 active LLU connections, ranking 5th in the market. Rumour has it that the company will “soon” be acquired by a major market player. The rumours are not denied by the company’s executives.

Last, NetOne and AlgoNet , two small telecom operators which have been active in the market for very long time have recently merged. Neither of them has ever considered being in the market’s front line. Details on the plans of the new company have not yet been released. It remains however interesting to see what these low profile operators are planning for the future. NetOne is controlled by Sciens Capital Management and BNP Paribas Private Equity, and Algonet by Olayan Group. According to latest info Olayan Group will hold 40% and each of the other two 30% of the newly founded company.

In the next and probably last part of this short analysis I intent to write about the coming of yet another operator in the Greek market and review the general characteristics, dynamics and potentials of the market. The question is…. “Will the advent of a newcomer release the market pressure or will it just poor more oil into the fire?”

UPDATE: Follow up the review in Part III.