Despite the negligible number of new phone lines installed and the drop in the amount of time spent by Romanians on their home phone, RomTelecom has nonetheless managed to report profits for last year. This can be explained by the aggressive efficiency improvement policy it has been pursuing, which saw 5,700 layoffs in 2004 with 50 million euros spent on severance pay.
RomTelecom’s revenues for last year amounted to 839.1 million euros, an increase of 5%, with net income also increasing to 107.1 million euros, compared with the net losses of more than 13 million euros in 2003.
Operating income went up 31% to 285 million euros.
The improved results were achieved despite the number of new phone lines installed increasing by a mere 0.2% to 4.3 million and the total volume of calls logged in the RomTelecom network dropping by 3%.
RomTelecom is left with approximately 18,000 employees and is preparing a new strategy to take on its main rivals, the mobile telephone operators.
“Before 2004 we experienced serious cash troubles and had to cut back on investment,” James Hubley, RomTelecom’s CEO, told Ziarul Financiar. “We are now back in shape financially and we want to proceed with our projects for this year.”
RomTelecom’s improved performance is largely due to the decline in operating expenses, company officials say. Expenses fell 4% last year, with the operator saving 25 million euros as a result. On the other hand, the impact of the ROL growth was “extremely negative”, since RomTelecom calculates its tariffs in euros and bills customers in ROL, Hubley explained. He estimates that RomTelecom began to lose some 30-40 million euros starting last year as a consequence. As to the number of new phone lines installed numbering in the mere thousands, Hubley says this was no reason for concern. “Our primary focus in 2004 was to upgrade the existing network and the installing of new lines was not a priority.” Referring to the decline in calls made through RomTelecom network, Hubley claims this was due to the effects of competition. “This is only natural. It is impossible for a former monopoly company to preserve market share when it loses its monopoly.”
The RomTelecom CEO did not refrain from talking of his competitors in the mobile telephone industry in a harsh tone of voice: “I am aware that RomTelecom, historically speaking, is a company that people don’t really love. Yet I find it unbelievable that no one looks at the financial results of the mobile operators. People scrutinise our prices, while they can afford huge margins and similar prices. This is somehow accepted, maybe because they have a better image.”
RomTelecom’s management has a list of 5 or 6 projects on the table for the near future. They include a new billing system, upgrading the current network, high-speed data transfer and Internet access services, addressing the situation of mobile telephone operator Cosmorom, and RomTelecom’s floatation scheduled for 2006.
Hubley added that the company would start using the new billing system called Geneva as of July. The new system is more flexible and will make it easier to offer more personalised options like those offered by mobile operators (favourite numbers, favourite hours, etc). mihai.musatoiu@zf.ro