As Greece defaults on its debts after years of economic mismanagement, its telco sector is on the ropes. As the country goes to the polls this weekend to vote on the Government’s response to the austerity measures being demanded by the country’s creditors, the teklco industry is wondering whether it has a future at all.
Telco industry analyst Paul Budde, who tracks the telco markets in many countries, thinks it will pull through. “Telecoms as a sector is sheltered to a degree by the necessity of access,” he says in a recent newsletter to clients. “People will forgo most goods and services other than internet connectivity, and the test for telcos is to retain customer trust and quality services. The revival of the Greek economy, more than most others, depends on it.”
But Budde said the crisis will prolong what has already been a a profound change in the country's telecom sector. “There had been optimism on the market’s prospects after the sector was liberalised in 2001, when the stock market was still healthy).
“This encouraged a number of players to set up as telcos, and during the next few years a sequence of bankruptcies, mergers and rolling-door new market entrants radically overhauled the sector.
“The decline in revenue kicked in from 2008, and continues still as customers cut back on discretionary spend, cut off fixed-lines and stop their pay TV subscriptions. The sector's dwindling revenue has meant that its contribution to GDP has fallen steadily from a high of 4.5% in 2007 to 2.9% in 2013 and an estimated 2.6% by 2015, among the lowest in Europe.”
Budde quotes data from telco regulator EETT which shows that operators’ turnover in 2013 dropped by 12.1% year-on-year. “Gross profit among telcos has fallen from a high of €2.6 billion in 2007 to some €700 million in 2013 and an anticipated €400 million in 2015.
“The dominant telco OTE, itself encumbered by cost-cutting targets being implemented for fiscal 2015, reported a 2.4% fall in revenue for the first quarter of 2015, year-on-year, while EBITDA fell 3.4% and net profit fell 27.6%.”
Budde says this is likely lead to a degree of musical-chairs among the smaller players, with some unable to compete and so exiting the market, while others may become subject to takeovers. “OTE has experienced significant challenges, but is supported by the organisational ability and financial clout of its parent Deutsche Telekom. Despite market liberalisation, OTE continues to dominate all sectors in the market.”
Budde’s analysis of the Greek telco market is available here (subscription required).