To sell or not to sell Cosmorom?

Last year it was just a rumour, but now it is beginning to take shape: Greek group OTE is thinking about looking for a buyer for its Romanian-based mobile telephony operator Cosmorom. The worldwide telecom market slowdown and the loss of the monopoly in Romania are the two factors making OTE look for a solution to the problem called Cosmorom, a company with a meagre market share and with capital stock that is actually half its debts.
These days, OTE has said that recovery plans for fixed telephony company RomTelecom do not include the mobile telephony operator Cosmorom.
“OTE shall not provide the financial support for an organic growth of Cosmorom and we are looking into several options together with RomTelecom, including the sale of the company and all of its assets,” said Iordanis Aivazis, executive VP of OTE International. According to Aivazis, the company’s sale will not be able to fully cover the debts of Cosmorom ($190 million).
Whenever there are official statements about Cosmorom, the market has learned to be cautious, because of a certain lack of consistency: an OTE official can very well say that the group wants to sell or close down Cosmorom, only to be contradicted by another company official, after several days. Such a situation occurred at the end of last year. And several days ago, George Scarpelis, OTE International VP and RomTelecom interim general manager, sounded optimistic, when he said that Cosmorom would account for the second stage of the investments scheduled by the Greek company for the Romanian market. “Mobile telephony penetration in Romania reaches 20% – 22%, compared with 50% – 60% in the European Union, which shows the domestic market’s potential is yet insufficiently exploited. The investments in Cosmorom will go on, but we are also considering partnerships with other operators to develop it,” Skarpelis said. Thus, OTE’s sale plans for Cosmorom may be soon denied by the company’s HQ.
RomTelecom, sole shareholder of Cosmorom, will soon enter an ample restructuring process to cope with the drop in revenues, triggered by the market deregulation. OTE has announced plans to lay off one third of the RomTelecom staff (about 9,000 employees) in the next two years. Cosmorom is seriously draining RomTelecom. When OTE released the nine-month financial results for 2002, it said that RomTelecom’s profit in the first three quarters ($29.5m) had been “influenced”, meaning diminished, by the costs of installing and developing the Cosmorom network. Moreover, last summer, Panagiotis Kargados, then RomTelecom general manager, said that Cosmorom needed investments of $150m by the end of 2003 in order to survive on the market. There are no official data on Cosmorom investments.
Orange is not interested in Cosmorom, said Bernard Moscheni, chief executive officer of Orange Romania. “Cosmorom has a limited market value, since it only has 50,000 customers,” Moscheni added.
Should a strong investor buy Cosmorom, the company is not likely to become a powerful operator in a short period of time. “There are already three big operators on the Romanian mobile telephony market. Moreover, the mobile telephony penetration rate has reached 25%, while a massive increase in the number of customers is not likely, considering the population’s low incomes,” Moscheni said.
Cosmorom officials would not comment on the OTE statements. “If something new comes up, we shall issue a press release. Right now, OTE is the sole information source,” said Mihaela Claudia Radacina, a BTL special expert-PR with Cosmorom.
According to market rumours, one of the companies interested in Cosmorom is British operator Vodafone which also owns 20% in MobiFon, Romania’s leading mobile telephony operator.
“Speculation is ripe. For now, there are only plans to attract a major investor for Cosmorom,” Radacina added.