Bernard Moscheni: There's still some way to go before UMTS

The Romanian telecommunications market does not need UMTS (the third generation mobile telephony) yet, because the GSM 900 and DCS 1800 frequencies are still not fully used, says Bernard Moscheni, CEO of the mobile telephony operator MobilRom.

“We are interested in UMTS, but we must keep an eye on the market, as well,” Moscheni says. The MobilRom CEO feels that a market where 95% of the subscribers are using only voice services does not necessarily need to move to 3G.

He estimates that the investments to be made in order to use the UMTS technology might amount to some $300 million for each operator, apart from the licence cost, that is of $50-$100 million.

The UMTS licences have already been awarded in several Western European countries (for billions of dollars) because the development of these markets tends to exhaust the capacity of the frequencies used so far.

“Anyway, we must take into account the fact that the equipment and terminals required by this technology will not be available worldwide any sooner than 2003,” Moscheni pointed out.

“There are alternative technologies, as well, which provide a very high data transfer speed,” he added, referring to the EDGE/GPRS technology (the 2.5 generation). MobilRom has recently launched the OfficeNet Access, based on GPRS.

Furthermore, MobilRom, part of the Orange Company, which includes all the mobile telephony operators in which France Telecom Group holds stakes, signed a $20 million deal with Alcatel for the installation of a fibre optics network last week.

The reason for this investment is linking Romania to the European fibre optics backbone held by Orange. When the telecommunications market becomes deregulated on January 1, 2003, MobilRom (Orange as of next March) will be one of RomTelecom’s competitors, at least for the international calls segment. “I estimate the tariffs to drop 50% at that time,” Bernard Moscheni says.

Are the operators in Romania ready to cope with the massive investments required by competitiveness on a free market? MobilRom does not seem to worry about this: “We have made the cash flow forecast up to 2004 and even if we have to pay for an UMTS licence we will still not have to borrow money,” Moscheni specified.

MobilRom at the end of July had 1.41 million clients and a 1.7 million target for the end of the year. Its main competitor MobiFon has recently announced it has already exceeded 1.5 million clients.

“Our targets are still the turnover, the service quality and the profitability, and the results for the first seven months met our expectations,” Bernard Moscheni commented. He says the company estimates to reach 3 million clients in 2004. “The radio and fibre optics network will allow for a 5 million-user capacity.”

The value of the company was estimated by ING Barings to $1.2bn-$1.6bn at the end of Q1. Considering the conditions on the international and on the local telecommunications market, the company could be worth $1bn to $1.3bn, Moscheni estimates.

He specified that an IPO in Romania was out of the question, as the Romanian capital market is too small to absorb even a small percentage of the stock of such a large company.