Greek firms fight on, despite 2010 bearing them no gifts

2010 was a tough year for both Romanian and Greek economies. Against this backdrop, the country remains the fifth biggest source of FDI to Romania with companies from the Balkan nation having a strong presence in banking and telecommunications. In addition to this, in the first nine months of the year 158 new entities with Greek shareholding were registered in Romania, bringing the total number of local Greek-owned firms to 4,919.

Simona Bazavan

At the end of 2009 the total amount of Greek foreign direct investments (FDI) to Romania stood at EUR 3.281 billion, according to the National Bank of Romania. “The additional invested capital in Romania by Greek companies in the first 11 months of 2010 reached EUR 405.75 million, according to statistics from the National Trade Register Office (ONRC),” Efrossyni Mita, counselor for economic and commercial relations with the Greek Embassy to Bucharest, told BR.

In the past year local companies were forced to adapt their strategies to new market conditions, very different from the ones prior to the crisis. Greek companies were no exception, but as the authorities’ measures made life difficult for the business environment it has also created more predictability. “Although last year was a challenging one for the Romanian market, and without analyzing the impact of specific measures of economic policy, one could say that the measures introduced have increased in general terms the predictability of the market environment and by stabilizing macroeconomic figures, are creating expectations for a positive evolution for the economy in 2011,” Mita said.

In her view future Greek investment projects in Romania could target fields such as renewable energy and agriculture. “This is a domain of economic activity that is also developing in Greece, and Greek companies are ready to share their experience with Romanian players in the field of renewable solar, wind or hydroelectric energy.

Agriculture is also a promising sector for future investments. EU Structural Funds, especially in a period of global economic crisis, could offer Romania new opportunities for development and investments,” she said, adding that Greek construction companies are interested in PPP projects for infrastructure development.

Romtelecom lines up local expansion

Major Greek investors are active on the Romanian telecommunication market: OTE present locally with landline operator Romtelecom and mobile telephony operator Cosmote, and Germanos Group.

Romtelecom posted revenues of EUR 716.9 million in 2010, a decrease of 8.4 percent, according to a report from the Greek company. Romtelecom’s EBITDA fell by 38.7 percent, to EUR 154.7 million. “It would have been hard for any telecom market but it was even harder for a market such as the Romanian one, with one of the most intense price competitions in the region,” said Yorgos Ioannidis, GM of Romtelecom. At the end of 2010 the total number of subscriptions reached approximately 4.7 million, higher than in 2009.

The number of broadband clients was more than 1 million. DTH Dolce’s television viewers also surpassed 1 million. Romtelecom’s IPTV customers reached 30,000 at the end of the year and the number of VDSL high-speed internet users surpassed 50,000.

The costs of the voluntary leave program increased threefold up to EUR 24.2 million, from EUR 8.6 million in 2009.

Earlier this year, Romtelecom announced that it would lay off an estimated 1,000-1,400 people across the entire company as part of a process aimed at increasing the efficiency of its operations. Costs have become the number one priority given the low purchasing power of customers and their expectations of quality services at low prices. “We are operating on an extremely competitive market, with some of the lowest prices in Europe for communication services, and we have to be able to improve our internal performances, our ability to offer more with fewer resources,” said Ioannidis.

The company has started more than 20 projects that target the company’s important business lines. These include improving processes, from sales to the installation cycle, increasing efficiency in call centers and stores and simplifying the product portfolio. Other new related projects are currently in the evaluation stage. The projects that have been started now will unfold until 2013.

“Many of the projects we have in mind also involve a reduction in personnel, since our aim is to be able to achieve more with fewer resources. For example, at this point we have several thousand options regarding products in our IT systems. We intend to reduce them massively in 2011, first of all to help clients to choose more easily but also to reduce the costs of maintaining all these products. This will lead to less need for personnel to be in charge of them,” said Ioannidis.

Broadband internet and TV services will remain priorities for the company in 2011 as it moves closer to its statute as supplier of electronic entertainment services. Online services will also be a priority.

“We are already working on a TV platform that will be launched soon and we will continue to develop the online

options for our clients whose results have so far exceeded expectations,” said the GM.

Ioannidis sees 2011 as “a year full of challenges for Romtelecom, but the company has already proven its ability to re-invent itself and I trust it will do so again,” he concluded.

Steps in this direction have already been taken. Earlier this month, Romtelecom took over Boom TV. “Romtelecom has signed the contract to take over the assets and customer base of Boom TV with DTH Television Group. The total price of the transaction will be established based on the number of customers who are taken over.

Romtelecom has notified the Competition Council of this takeover based on the offer that was submitted,” said the operator in an official statement.

Media reported that Romtelecom, which had been in negotiations to take over the TV station, was willing to pay between EUR 7.3 and EUR 8 million, excluding VAT. The negotiations took place through Casa de Insolventa Transilvania, which is currently representing DTH Television Group, the company that runs the insolvent Boom TV. At the moment, the TV group has debts of more than EUR 100 million.Romtelecom is taking over the station in order to add the 95,000

subscribers to Boom TV to its customer base.

These are not the first negotiations between the telephone operator and Boom TV. Two years ago the companies also

sat round the table but failed to reach a result. Meanwhile, Cosmote Romania posted total revenues of EUR 468.8 million for the financial year 2010, ended December 31, as reported by OTE Group, which represented a 7.2 percent growth on a y-o-y basis.The total customer base (including Zapp) reached 6.84 million at the end of 2010, down 5.9 percent. The postpaid ratio increased to 21.9 percent, as result of the business segment’s growth.

“We will continue to focus on the corporate and broadband segments and also on all the company’s core directions, such as network enhancement, latest technologies, customer care and retail. At the same time, we will continue to expand the products and services portfolio,” said Konstantinos Apostolou, CFO of Cosmote Romania.

The company’s EBITDA amounted to EUR 73.7 million, 12.7 percent up on 2009.Cosmote Romania has a market share of 24 percent. Since its launch in 2005, the company has invested nearly EUR 1 billion.

Retail detail

In the FMCG industry, Swiss and Greek businessman Jean Valvis has projects in the wine trade (Domeniile Samburesti), bottled mineral water (Aqua Carpatica) and the bio energy industry (Dorna Agri).

Aqua Carpatica was launched last year and Valvis says he is targeting a 10 percent market share of the local bottled mineral water market by 2012. About EUR 1.2 million has been spent promoting the brand. Aqua Carpatica is not the first investment project of this kind for the businessman. He sold the Dorna dairy business to French group Lactalis in 2008 and Dorna Apemin mineral water producer to Coca Cola back in 2002.

Marinopoulos Coffee Company part of Greek Marinopoulos Group, the local operator of Starbucks coffee shops, has reopened the Starbucks location in Bucuresti Mall, following a EUR 300,000 investment. The company closed the coffee shop it initially had in the mall and re-opened it on two levels. The new location has a 360-sqm surface, making it the largest in Romania. Starbucks has eight coffee shops in the country, six in Bucharest and one each in Cluj and Timisoara.

In Romania, Marinopoulos Group also operates the Marks & Spencer, GAP and Sephora stores. Sprider Stores came to Romania in 2007, when it opened its first store in City Mall. It currently operates 16 shops in Romania in cities such as Bucharest, Cluj, Timisoara, Buzau, Pitesti, Bacau, Iasi, Suceava, Oradea,Targu Mures and Piatra Neamt.

In 2010 the clothing retailer opened two more local outlets in Braila and in Piatra Neamt. Sprider Store Braila was opened in October 2010 in the Braila European Retail Park and has a surface of 950 sqm. The following month Sprider opened its 16th local shop in Piatra Neamt in the Galeria GTC shopping mall. The outlet has a sales surface of 1,060 sqm, on two levels. In 2010 the retailer also invested in upgrading its unit in Arad. Since entering the local market, it has invested EUR 15 million in refurbishing its outlets in Romania.

Sprider Stores has a network of 112 units, 87 of which are in Greece and 25 in cities in South Eastern Europe, namely in Romania, Bulgaria and Cyprus. In the first nine months of 2010, the retailer posted consolidated sales of approximately EUR 105 million, 8.5 percent less than the same period of 2009. Overall, the group’s EBITDA went down by 67.6 percent.

Another Greek clothing retailer, Elmec Romania, the local distributor of the Nike brand, opened the largest local Nike store in Baneasa Shopping City in Bucharest earlier this year. The 350-sqm shop required a EUR 200,000 investment. It features a design inspired by US gym halls.

Last week, the firm announced a EUR 300,000 investment in the replacing the corporate furniture in the spaces dedicated to the Polo Ralph Lauren brand in the Famous Brands Galleries in Bucuresti Mall and Plaza Romania. Last year the company invested another EUR 160,000 in extending the two galleries.

Elmec Romania was founded in 1999 and currently has a national fashion retail network that includes monobrand stores (Nike, Converse, Calvin Klein, Calvin Klein Jeans, Miss Sixty & Energie and Folli Follie) and multibrand stores (Famous Brands Gallery, Famous Brands, KIX, Star Place).

Greeks bolster bank scene

Greek banks have a strong presence on the Romanian financial scene. Bancpost, a member of Eurobank EFG Group, was set up in 1991 and now has more than 3,500 employees and an extended territorial network of over 286 branches. Eurobank EFG Group’s net income stood at EUR 113 million in 2010, down 69 percent y-o-y, according to the company’s financial report. Profits from Central and South Eastern Europe reached EUR 32 million in 2010, after losses of EUR 44 million the previous year.

The Alpha Bank Group came to Romania in 1993 along with the European Bank for Reconstruction and Development (EBRD) and a limited number of Greek entrepreneurs, and established Banca Bucuresti SA, which was renamed Alpha Bank Romania in 2000. Regarding its operation in Southern Europe, in the first nine months of 2010, Alpha Bank Group reported that its pre-tax profit stood at EUR 43.7 million, a decrease of 10.2 percent.

“While registering positive trends in operating income (up 7.2 percent), our result was adversely affected by the sizeable increase in impairments (up 25 percent) to EUR 142.5 million,” reads the group’s financial report.

In Romania, deposits reached EUR 1.5 billion (up 3 percent), while loans decreased by EUR 536 million (down 12.5 percent) amounting to EUR 3.8 billion, thus reducing the bank’s funding gap. In October 2010, Alpha Bank signed with the European Bank for Reconstruction and Development (EBRD) two credit lines of senior financing worth a total of EUR 200 million for its subsidiaries in Romania and Serbia.

“The funds are part of the Joint International Financial Institutions Action Plan to offer financing to the subsidiaries of European banks to support the economies of Eastern Europe via the transmission mechanism. That arrangement enhances our funding base, underpins our strategic role in the region and reaffirms our commitments to our investments in SEE,” said bank representatives. Another Greek player is Banca Romaneasca. In October 2003¸ the National Bank of Greece (NBG) Group, bought the majority package in Banca Romaneasca, having at present 89 percent of its share capital.

EBRD holds 10.2 percent of the bank’s share capital. Banca Romaneasca has 146 branches, 38 of which are located in Bucharest. Greek Piraeus Bank Group also runs operations locally through Piraeus Bank Romania. Currently, the bank has a network of 187 branches and about 350,000 local customers.

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