Romtelecom announces future strategy, wants new acquisitions

Newsroom 29/03/2010 | 11:09

As Romtelecom continues to keep tabs on its expenses, it will also keep an eye open for new acquisitions on the market while investing in its network. The company’s efforts this year will go into positioning itself as an electronic entertainer on the market in Romania for the residential sector while in the business sector it aims to become a major ICT supplier. The operator will also open new concept stores in Bucharest, Constanta and Braila.

Otilia Haraga

 

Last year Romtelecom made multiple acquisitions in order to increase its footprint on the local market. “In those regions of the country where we realized we could approach the customer with another model, we established our fully-owned subsidiary NextGen, through which we buy smaller telecom companies,” he said.

This year the operator has acquired New Com through NextGen. Ovidiu Ghiman, executive manager for strategy and business development (whom Romtelecom recruited from RCS RDS where he was commercial manager), said the final part of the transaction was still awaiting approval by the Competition Council. After the transaction is completed, NextGen will be present in more than 100 localities and will have more than 100,000 customers for TV, broadband and voiceover IP services. “Our plans are to keep looking for potential acquisitions in the market even if those acquisitions are small local operators or maybe ones which are active in a higher number of counties, both on broadband and TV,” said Ghiman.

The company will continue to invest this year. “I am not authorized to give you the numbers, but it will be more or less a similar figure to last year,” said Yorgos Ioannidis, general manager of Romtelecom.

Recently, the operator simplified its internet broadband access services into three main solutions: Surf, Play and Power. Surf is a subscription for clients who use internet occasionally, with download speeds of 2 Mbps and tariffs starting at EUR 2.9 per month, no VAT. Play, which is a more mainstream product, will offer speeds between 4 and 50 Mbps, at tariffs that start from EUR 4.4 per month, no VAT. Power addresses clients with more demanding needs, offering download speeds which vary between 8 and 100 Mbps and monthly tariffs starting from EUR 5.9, no VAT.

The company’s strategy is to position itself as the best electronic entertainer on the market in Romania for the residential sector. “This is why we have made investment in IPTV, are in advanced discussions with content providers, will have over 1,000 titles in our video-on-demand services by year end and why we are upgrading our broadband infrastructure,” said Ioannidis. In the IPTV solution there are currently 5 HD channels: Sport.ro, PRO TV, TVR HD, HBO HD and Discovery HD. At the end of May, Romtelecom will also launch HD solutions for DTH.

Romtelecom and Cosmote, both part of the Greek OTE group, are coordinating with regard to the two CDMA networks, the 410 Mhz and 450 Mhz, respectively. “We shall try to have complementary coverage in order to be able as a group to serve all the country,” said the GM. Currently, Romtelecom covers more rural than urban areas with CDMA.

As far as the business sector is concerned, the company is aiming to be the major ICT supplier on the market. Last year Romtelecom launched the solution Support of the Office Automation Environment. “We were already supporting almost 10,000 PCs in our company and we thought this was also an opportunity to exploit that in the market. Today we support almost 14,000 PC customers,” said Ioannidis.

One of the areas where the company has seen an increase is VPN (virtual private networks). “We increased our customer base with VPN last year by 14 percent, revenue wise by 10 percent. Furthermore, a while ago we launched our CDMA VPN which is a complementary solution, and whenever we don’t have fixed line VPN capabilities we can also deliver the CDMA VPN solution,” said Ioannidis.

With regard to outsourced services for Dolce television, an evaluation process is now underway which will see the number of suppliers of these services halve. “We now have 140 and I think we shall reach around 70, or even fewer,” he said.

Two weeks ago, Romtelecom launched a 100-sqm concept store in the Vitan area, which is based on standards applied at Deutsche Telekom. “In April we will have four such stores opened, two in Bucharest, one in Constanta and one in Braila,” said Ioannidis. The overall investment in these stores will be several hundred thousands euro. As part of this strategy, the operator opened three kiosks in commercial centers in Bucharest and Cluj last year.

The Romtelecom GM said Deutsche Telekom’s involvement would not have any impact on the management team in Romania. “I would say you will gradually see more and more Romanians in the management of Romtelecom,” he said. In fact, the overall number of expats in the entire company is no more than 19 people who are, for example, Greek, German, English, Polish and Slovak, Czech, American, South African, and Belgian.

 

Costs come under scrutiny

Romtelecom is currently implementing 20 efficiency initiatives. “By this, we mean different projects: controlling the fuel use, the number of cars and the logistics processes which include how many warehouses we have. We also have quite a few projects targeting bad debt collection and marketing effectiveness so we can spend the least with maximum impact. And we are trying to cut electricity expenditure. We’ve also launched a project called Ideea Mea, in which over 200 employees came up with ideas, 10-12 of which were very good and we are about to implement them,” said Ioannidis.

According to the GM, Romtelecom is still the operator with the highest expenses on the market. Asked by Business Review about this, Ioannidis said: “To compare, you can look at the revenues that Vodafone or Orange have and their number of employees. They have fewer than 3,000 employees and over EUR 1 billion in revenues. We have revenues of EUR 807.7 million and about 9,500 employees. By looking at this alone, you understand the difference.”

Optimizing operations is a must, he said. “We started with a company that had 50,000 employees at the time when it had a monopoly. As it entered the free market, it started to reduce the number of employees. In 2008, we realized that we could reduce the number of employees by 2,000-2,500. Last year 500 people left and then another 400 were outsourced. Now we have decided to lay off another 600 to ensure better efficiency and increase our teams that are supporting customers for example.”

The company’s GM said Romtelecom had evolved in the past few years from being a mere telephony provider with about 3.5 million RGUs (revenue generating units) to reaching 4.4 million RGUs – telephony, internet broadband and TV customers.

 

‘A price war is the worst that can happen on a market’

Ioannidis said Romtelecom was “maybe the only operator in the market that fights to keep prices at a reasonable level.” He added: “A price war is the worst that can happen. There are examples even on the Romanian market when you are shooting yourself in the foot. Because technology in the telecom sector changes very rapidly, you have to charge the appropriate prices so that you can yield profit at the end of the day sincec you need to reinvest part of the profit.”

The GM said that competition on the local telecom market was extremely fierce. “We are maybe the only company in Europe that has to compete with about 800 competitors nationwide.”

Last year, the telecom market shrank by a fifth compared to 2008. “The 20 percent reduction was due to people’s need to understand what is really happening and take measures,” said Ioannidis. “Romtelecom did relatively well, because we only lost 7 percent of our revenues and this was more or less the same as the GDP loss in Romania,” he said. “I believe in 2010 we shall see some sort of stabilization.”

 

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