This is the third and last part of the brief market review I started a couple of weeks ago. The first part presented the case of the operators that didn’t handle the heat and were eventually thrown out of the market. In part II I provided some insight on the plans of the existing players and how these plans are currently drafted. In this final part I will discuss the entry of a newcomer in the broadband market of Greece and will summarize with some overall personal conclusions about the market.
CYTA (Cyprus Telecommunications Authority) is the Cypriot incumbent. Contrary to his Greek counterpart, CYTA has already deployed PON in selected places in Cyprus and is currently evaluating implementation and operation issues of FTTH. Their experience has shown, according to company officials, that the cost difference between PON and P2P is not dramatic and that both technologies may be considered by an operator for large scale deployments on a case by case basis.
The company has recently established a local branch – CYTA Hellas to initiate the group’s businesses in the Greek market. The major breakthrough for CYTA Hellas was the award of one of the deployment zones (this of Western Macedonia) of Call 157 (EU funded InfoSoc Programm). Call 157 is a major broadband supply stimulation initiative of this administration and involves the provision of a minimum guaranteed quality broadband services to all cities and villages over 500 citizens. CYTA Hellas and the rest of the winners of other deployment zones benefited from the project and deployed backhaul infrastructure (comprised of both fiber and wireless technologies) to meet the tender requirements.
On the 20th of October, in a special event, CYTA Hellas announced that is starting its retail business in Greece. Currently CYTA can offer services only in Western Macedonia via its own broadband network. A major issue for the company is how it will enter the market of the metropolitan areas of Athens and Thessaloniki as at the moment it does not have operational network in place. Moreover, initial saturation of the DSL market is signalled by the slow down of take up rates. Coming lately to the scene, CYTA Hellas will have to decide if it is going to build from scratch its network or if it is going to acquire existing networks. Based on the company’s past record, CYTA has the capacity to succeed in the market and the recent turmoil (both in domestic telecom industry and in the international financial system) might point to a series of acquisitions as the best way to accomplish its goals. This strategy will certainly release much of the pressure accumulated in the industry and will promote the formation of the fourth significant group in the market. From where I stand, grouping some of the remaining operators under CYTA Hellas mothership will signify positive developments for the company, the acquired firms and the market overall.
In conclusion
For the last seven years, the telecommunications industry in Greece has been the battlefield of fiercly competing operators. Conventional thinking suggests that too many operators entered the market in the first years of liberalization resulting in a great wealth of choices for the consumers. At the same time however, it proved difficult for any of them to reach a critical mass that would enable a quick move forward. OTE was accused for delaying commissioning and wholesale support for the first years of liberalization (both in transit telephony and local loop unbundling services). Even though he was fined by EETT for various of its practices it eventually managed to catch up with its competitors and compete succefully as soon as he had its operational processes prepared.
Recent bankcruptcies prove that the market was infact too small for the vast interest shown by investors. The recent outcomes also proved that in telecommunications true service differentiation is required in order to survive. Infact, neither of the companies that didn’t make it did well on unbundling. Moreover, the inhability of the alternative operators to differentiate in product mix resulted in price wars that only made the situation worse.
OTE has announced the Reference Unbundling Offer (RUO) in 2001 but it was effectively put in action late 2003 early 2004. This delay had a major negative impact for the operators that were prepared early for unbundling business. These operators eventually sat on an infrastructure without being able to do much with it. It is worth mentioning that after the effective application of RUO the overal broadband diffusion increased dramatically. EETT & OTE have both been blaimed for the delayed negotiations regarding the 2nd RUO which was announced a few months back and is addressing several loose ends of the 1st RUO. Effective unbundling in Greece started at least 5 years later than in other European countries and we are still at least 5 years behind.
Also, in my view, year 2008 marked a significant change in EETT’s response towards operator disputes. This summer EETT didn’t try to settle things down between disputing operators, instead it stated that “No one expects from OTE to be a telecommunications bank“. If you belong to those who thought/think that EETT favoured/tolerated alternative operators over OTE this definately sounds like: “From here on, you’re on your own!”
Today, the market is making a significant turn. Recent information (released by OTE) reveils a significant shift of subscribers back to the arms of the incumbent. It seems that competition did not manage to keep customers with reduced prices due to lower quality offerings. What’s important, quality is not only about high speeds rather about customer service, technical response & competence etc. And OTE, although is still suffering from his inherent incumbent’s syndroms, seems to have a lead in this compared to his competitors. This customer shift is underpinned by the strong uncertainty in the market as to which operator is financially secure and have a sustainable business model to support customer’s business operation in the long-term.
My take is that the era of spontaneity and grace is over and the game will be played not on the price premises rather on service quality and innovation. Still though, the game is exciting with great prospects for those who play it wisely!
