The integration and rebranding of Cosmote and Romtelecom
The event of the year in the local communications industry was the integration and rebranding of Cosmote with Romtelecom, considering both the cost of transition to Telekom brand, of around EUR15 million, and the size of involved companies (with an overall annual business of around EUR1 billion).
The rebranding is significant also as it represents a bet by Germany’s giant Deutsche Telekom on Romania, a market where it competes with rivals such as Orange, Vodafone, UPC, as well as RCS&RDS.
A move initiated as early as 2013 under the coordination of German Nikolai Beckers, the integration of former Cosmote and Romtelecom is one of the most complex operations of this type in Romania: in less than two years around 10,000 people, employees of the two operators, had to undergo a radical management, leadership structure and work process change, then rebranding and commercial portfolio relaunch, without taking into account the voluntary redundancy programs and the outsourcing of some activities.
Operators defy the special construction tax-Romania retains a leading position by internet speed globally
Communications operators continued to make massive infrastructure investments this year, both in fixed and mobile networks and further increased the speed of data connections, seemingly defying the special construction tax introduced overnight, without consultations, by Ponta government. Despite this tax, which took out around EUR35 million from operators’ accounts in 2014, Romania will end the year ranking third among the countries boasting the fastest internet connections drawn up by Ookla company, with an average speed of 60.82 Mbps, ahead of countries such as Japan or France.
Outsourcing for lower costs
Under the pressure of meeting their targets despite the overnight introduction of the “Ponta tax” on internet infrastructure and coping with the fallout of the lower interconnection or roaming call charges, operators starting signing contracts for the outsourcing of a series of technical activities. For instance, in June Cosmote and Romtelecom (currently Telekom) outsourced the network command centers, together with 750 employees, to Swedish Ericsson company. In late 2014, Ericsson also gained a contract with Orange, which will also transfer around 150 people from the technical department.
Reduction of interconnection charges
Telecom regulator ANCOM on April 1 cut interconnection charged by almost 70% from 3.07 eurocents to 0.96 eurocents/minute, thus paving the way for the launch of several unlimited call offers irrespective of network. With this reduction, the cost of operators for offering to clients 200 minutes of calls in any network for instance declined almost eight times against 2006: just EUR1.9 from EUR14.
National roaming contract between RCS&RDS and Vodafone
Beyond the rebranding of Cosmote and Romtelecom and the lower interconnection charges, the hottest event on the local communications market in 2014 was the signing of the national roaming contract between RCS&RDS and Vodafone, which allowed RCS&RDS clients to automatically access Vodafone network in the areas not covered by Digi network.
The rapid signing, without the expected delays, of the national roaming contract between the two companies, which solved one of the biggest problems of Zoltan Teszari’s company on the mobile telephony segment, the coverage of its own network, was a highly unexpected piece of news in the industry.
The signing of the contract, which suddenly conferred a national relevance to RCS&RDS’s ultra-aggressive offers, generated a wave of speculation on the market about the reasons and interests of each side of signing such an agreement so quickly.
After the inking of the contract with Vodafone, RCS&RDS also committed communication errors worth studying in faculties in its relation with its clients: it surreptitiously introduced limits to the use of Digi services through Vodafone network, causing a wave of rage from users, which accused the company of lack of transparency.
Despite these problems, in the first ten months of the year RCS&RDS was the network that attracted the biggest number of users from other networks through porting. While in October 2008-December 31, 2013 only a little more than 8,300 mobile telephony numbers had been transferred from Orange, Vodafone or Cosmote/Romtelecom/Zapp (current Telekom) networks to the RCS&RDS network, in January 1-October 1, 2014, almost 110,000 numbers were moved to Digi network. According to ANCOM data, in 2014 RCS&RDS is virtually the company that attracted the biggest number of clients from other networks (including phone numbers).
Internet services consumption boom
The number of fixed and mobile internet connections reached 18.3 million in late June, up 22.8% from June 30, 2013 amid a 28.5% increase in mobile connections to 14.4 million, according to ANCOM data. In the case of fixed connections, their number rose from 3.7 million in late June, 2013, to 3.9 million at the end of this June.
EU fund-based telecom network in disadvantaged areas
After several years of delays, where Romania was close to losing the non-reimbursable funds made available by the EU, the project related to the building of a communication network in the so-called “blank areas” in the country, where no telecom operator is present, was signed. Romtelecom and Cosmote Romania (Telekom group) will build the network in 783 localities lacking coverage for such services, with the value of the project amounting to RON365.8 million, VAT included (EUR83.1 million).
Delayed decision in the case of former Romtelecom stock
Romania’s government preferred to postpone clearing up things about its stake in the former Romtelecom company, will all talks about listing on the bourse or the initiation of direct sale negotiations with Deutsche Telekom remaining just pledges. The representatives of the majority stakeholder (Greek group OTE and German group Deutsche Telekom) repeatedly stated they expect a proposal from Bucharest about this process, mentioning though this has not come up. The state will supposedly make a decision on the basis of a report drawn up by a team of consultants selected back in December 2013, made up of Swiss Capital, the biggest broker on the local bourse, Swiss investment bank UBS, Musat and Asociatii, a major local law firm, and BT Securities, Banca Transilvania’s brokerage arm.
Feature phones start disappearing from shelves
With an increase of 20% in the first 10 months (to 1.8 million units) and of at least 60% for the entire year, Romania’s smartphone market boasted the biggest growth in Europe. While in 2013 smartphones weighed 40% in total sales, in 2014 we already reached 55% by number of units. “Next year, I don’t believe we will be speaking much about feature phones,” anticipates Alexandru Munteanu, head of the telecom unit of the local subsidiary of South-Korea gaint Samsung, leader of the local smartphone market. Smartphone sales for the first time beat feature phone by weight in October 2013.
Ukraine interference scandal
2014 also witnessed the outburst of a scandal originating in the biggest radio spectrum auction in the history of Romania, which took place in 2012 and brought the Romanian state revenue of almost EUR700 million. Vodafone, the second largest player on the local mobile telephony market, filed a preliminary complaint against ANCOM, demanding the payment of EUR15million, representing “compensation” for “damages” caused to the company by the fact that part of the radio spectrum acquired in 2012 from the Romanian state cannot be used in over 20 counties, because of interference generated by communication companies from Ukraine.
To support its complaint, the operator came up with measurements made by experts on the field for one month, documenting the extent of problems caused by the interference from Ukraine: the operation of over 1,000 antennas in over 20 counties with millions of inhabitants is hindered. To be able to further provide voice and data services in the 20 counties, Vodafone had to “lease”, starting April, “space” in the frequencies of rival RCS&RDS and Telekom (former Cosmote).
The problem had not been sorted at the end of the year, according to Ravinder Takkar, the general manager of Vodafone Romania.
The overall value of lease contracts was put on the market at several million euros per annum. This issue would reportedly one of the reasons why Vodafone signed the national roaming agreement with RCS&RDS so quickly.
(English version by Catalina Apostoiu)