Tuesday, February 27, 2007

Cosmote staking a lot on growth of Romanian market

By George Hatzidakis - Reuters

Greece’s largest mobile-phone operator Cosmote expects continued growth over the next three years, fueled by its Germanos retail arm and its Romanian operations, its chief financial officer said yesterday.

Cosmote, which entered the Greek market in third position in 1998, is now one of Southeast Europe’s biggest mobile operators. It aims to become the premier player as it expands aggressively in the region.

“Romania will play a big role in our future growth; it is our biggest market,” Chief Financial Officer Ilias Fotiadis told Reuters in an interview. “There is big growth potential there as far as the telecoms market is concerned, but also as an economy.”

Last week, Cosmote reported 2006 profit growth of 6.1 percent to –360.5 million, with sales up 33 percent at –2.4 billion. Its subscriber base grew 35 percent to 11.2 million customers.

Costs related to the group’s expansion into Eastern Europe held back earnings last year. Cosmote’s Romanian investment had a loss of about –65 million. But Cosmote’s investment in Romania and its acquisition of retailer Germanos are expected to start paying off soon, with the addition of the well-established Germanos telecoms equipment retail network in the region helping to bring in more customers.

“In all countries, Germanos played a catalytic role for the growth of our subscriber base from the last quarter 2006,” Fotiadis said. “There is significant growth potential that will be seen in the coming quarters and years.”

Last year Cosmote added an extra 3 million customers. About 43 percent came in the fourth quarter alone, mainly due to the Germanos acquisition, the company said.

Cosmote is targeting 15 million clients by 2009, while Romania currently accounts for about 1.23 million customers.

“Romania will make the difference over the next five years. In the medium term, we’re targeting 2-2.5 million customers there. We are aiming for Romania to be EBITDA positive within 2008,” Fotiadis said.

Cosmote plans to further expand the Germanos network so that by the end of 2007 it will have 1,000 outlets throughout the region – Greece, Romania, Bulgaria, Albania and the Former Yugoslav Republic of Macedonia. “Germanos will be the engine of our subscriber-driven growth. It has a big network and the best independent outlets in these countries,” Fotiadis said. “It will be our subscriber acquisition vehicle.”

Cosmote also does not rule out expanding further into the region in countries such as Serbia, where parent OTE owns 20 percent of Telecom Srbija.

“Our Serbian interest at this point is linked to OTE’s moves, any development on Telecom Srbija and its mobile arm would interest us,” Fotiadis said.

Cosmote shares trade at about 17.5 times estimated 2007 earnings, in line with Greek peers with an earnings multiple of about 17.9, according to Reuters Estimates.

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