Zapp grows four times in US dollars

Telemobil, the company that operates the only CDMA mobile telephony network in Romania and owns the Zapp brand, has seen its turnover in dollars up four times this year. Whereas its 2002 revenues were worth more than $12 million, this year’s turnover might be somewhere in the neighbourhood of $50 million, Cuneyt Turktan, Telemobil’s President of the Board of Directors estimates.

At the same time, the company expects to reach the critical subscriber mass by the end of the year that will allow it to post sustained growth. Zapp will reach about 200,000 users by December 31, 2003 to be precise. The number of users is supposed to increase by approximately 50% in 2004 so that it might reach 300,000 by the end of that year, Turktan adds. Out of the total subscribers, 80%-85% are now business clients, i.e. companies that have at least five Zapp subscriptions, as explained by the official.

Telemobil launched the first Zapp service in December 2001 and has been operating at a loss thus far. Its EBITDA will be positive next year, though, the company management estimates. Telemobil will not be making net profit any sooner than three or four years, Cuneyt Turktan says.

Until such time comes, the company is determined to keep investing on the Romanian market.

“Our investments this year will amount to approximately $60 million and we estimate to invest approximately $100 million next year,” Telemobil’s president said. The company will invest $7-$10 million dollars in upgrading its infrastructure by yearend so as to allow high-speed data traffic.

Telemobil has recently announced it had received a $20 million loan from Citibank Romania. Sources on the market say Zapp is in advanced talks over getting a foreign loan worth approximately $100 million, which it will use to expand its network. The funding could come in form of a loan granted by four American banks headed by US Exim, the United States’ foreign trade bank. Zapp launched the Brew lab yesterday. This is a lab aimed at developers, a place for Romanian software companies interested to develop and sell mobile applications for the CDMA system both on the domestic and international market to test their products.

The testing in Zapp’s lab will be free of charge and the software will be assigned a grade used by Telemobil to judge whether it can be sold or not. The Brew lab is located at Zapp’s Balotesti headquarters and the potential market for the applications developed by Romanian companies amounts to several tens of millions of users worldwide.

“These applications could come to account for 10% of Romania’s total software and IT services export within five years,” said Florin Talpes, chairman of ANIS (National Association of Software and IT Services Industry in Romania). Approximately 50 million euros, if the trend of the market maintains and the software and IT services exports exceed 500 million euros in five years.

“The 2002 export figure was 130 million euros and we estimate it to reach 170-200 million euros this year,” Talpes says. iuliana.susanu@zf.ro