Talking about a revolution
Cosmote Romania has turned around a failed mobile operating firm and added almost one million customers in only 12 months – can the momentum continue, asks Corina Mica, as she speaks with CEO Nikolaos Tsolas
In the last year Cosmote has so far splashed out over 200 million Euro trying to dress up, show off and take out to the ball the Cinderella of mobile telephone companies in Romania - mobile operator CosmoRom.
Launched in 2000 and 30 per cent owned by landline firm Romtelecom, CosmoRom spent four years struggling to gain a place on a market dominated by Connex (now Vodafone) and Orange.
The network never reached full nationwide coverage and consumers, sensitive to trends when choosing an operator, refused to buy into the brand.
In its last year of operations, CosmoRom was a national joke.
Most users with a screen flashing its insignia became a target of ridicule.
At the time of its purchase by Greek-based Cosmote in 2005, the mobile operator was struggling to win a one per cent market share, with under 50,000 customers in a sector that saw ten million users.
“We took up a company which had a bad reputation,” says Nikolaos Tsolas, CEO Cosmote Romania. “It was the only example in the world of mobile telephony that failed. First we had to change that perception and make sure the brand was associated with something different from what CosmoRom meant.”
No stranger to the region, Cosmote Group is present in Greece, Bulgaria, FYR Macedonia and Albania. The firm launched commercial operations in Romania in December 2005 with the aim to make mobile telephony “accessible to all Romanians”. At that time around one third of the country still had yet to go mobile.
The telecom firm introduced unique flat tariffs across all networks and announced investments of 450 million Euro over three years.
Over the first year Cosmote started what it called “revolution” in mobile telephony in Romania, with the launch of an extra option of 2,000 minutes per month for three Euro for the company’s prepay customers.
As a way of turning new consumers onto the brand, the strategy worked. Thousands queued up for hours to respond to the invitation. But when many used their phones, the huge traffic caused its fragile network - at that time - to crash. The firm's first major move was to become a victim of its own success.
Since then the firm has built up strategic partnerships with technology and accessory retailers such as Internity and bought out nationwide mobile phone store Germanos.
After continuous network roll-out and heavy investments, Cosmote's infrastructure now covers 95 per cent of the population and 82 per cent of Romania's territory and its number of customers have eclipsed, by volume, its nearest rival Zapp.
The firm has spent around half of its initial investment plan for three years - 220 million Euro - and its third quarter of 2006 saw losses of 46 million Euro.
“After one year and a week since we launched commercially in Romania, we have managed to surpass one million customers and the sales rate is very good,” says the CEO.
So how does Cosmote Romania compare to other four countries where the group is present?
“The situation is not the same,” says Tsolas. “First of all, when Cosmote entered Greece, the mobile phone penetration was very low. And we found the same situation in Bulgaria, with Globul. Here the penetration was around 65 per cent when we started, so the room to grow is above this and what we can ‘steal’ from the others.”
Competition is also different in Romania.
“Here in Romania we had to compete with two very well established and experienced multinationals,” he says. “Every market is different and we never said we came to be number one, but to be a decent, healthy and profitable organisation.”
Tsolas says what the firm achieved so far is “around” what it planned and “more or less” what the company expected.
“The first year is always the most difficult,” he says. “We changed the whole structure of the network, hired and more than doubled the workforce and set up operations. Next year I’m more confident that we will achieve our target because now we have our network in place, cover about 95 per cent of the population, have the people, know the market because we learned a lot. Our 'plan of attack' next year will be stronger now that we have learned our lessons in Romania.”
Investments planned for 2007 were already made in 2006, but this does not mean Cosmote will stop investing because it may have overdrawn its annual budget, says Tsolas.
“We are young and restless, but also serious and aggressive, both on the corporate and retail side,” he adds.
Changing the rules
Cosmote ended the year in contention with the Regulatory Authority for Communications (ANRC). The ANRC has delayed cutting interconnection tariffs – the costs one telecom operator pays another when a caller telephones across networks. Cosmote, together with mobile firm Telemobil (Zapp) and landline leader Romtelecom claimed the decision supported the duopoly of multinational local mobile leaders Orange and Vodafone.
The CEO argues the debate was not a question of losing money – but one of consumer choice.
“It is not a matter of revenues, because we are speaking about a small amount,” argues Tsolas, “but for the consumer to have many choices so that he can chose the best.”
The CEO says that consumers make decisions based on the network which their friends and family use - as opposed to taking the decision based on the prices on the market.
“ANRC should have taken a decision to allow people to change networks without additional costs,” says Tsoalas.
He argues that the regulator had a different approach to landline monopoly Romtelecom because it wanted to open up the market for competitors to enter.
“We have the same situation in mobile telephony,” he says, “with [two firms] which own 90 per cent of the market and ANRC should have ensured that new players have the chance to come in.”
Last year the Greek firm applied for one of two remaining 3G licenses for mobile phones, which gives operators the right to sell fast-download time services including video telephony.
Despite being the only contender which had experience of launching 3G, the company lost to Telemobil, owners of fourth-largest mobile operator Zapp and local landline operator RCS/RDS.
Tsolas is not bitter.
“It is not a life and death issue,” he says, “but we bid for a 3G license because the other two had it.”
The CEO says Cosmote will this year launch its ‘i-mode’ service, which includes high speed data transfer, mainly for corporate usage – but not video.
“The truth is that not many are interested in video telephony on mobile,” he adds, “it’s still used for voice.”
WHO IS NIKOLAOS TSOLAS?
What was the first reaction of Greek-Macedonian born Nikolaos Tsolas to hearing about his new position as CEO and President of the Board of Cosmote Romania – and his role to resuscitate the ailing body of CosmoRom?
“Oh my God!” he smiles. “Seriously now, this was a different project, it was the only telecom endeavour ever to have failed, so I was prepared for a busy schedule.”
Prior to joining Cosmote, Tsolas headed Cosmote's Bulgarian operation Globul, where he was CEO for two years and had been an executive director at TIM Hellas, the first Greek firm given the license to launch mobile phone services.
Tsolas holds a MSc in Mathematics from the State University of New York, USA and a PhD in Electrical Engineering and Computer Science from the University of California at Berkeley. Married with a son and daughter, Tsolas is a fan of PAOK Thessalonica, but says he does not have that much free time to visit his home country.
“During weekends I like to spend some quiet time in a coffee shop in Dorobanti,” he says, “read a book and enjoy a nice cappuccino.”
WHAT IS COSMOTE ROMANIA?
Mobile phone operator
Ranks third in Romania after Vodafone and Orange
Established in Romania: 2005
Market share: six per cent
70 per cent owned by Greece's Cosmote Group, following a 120 million Euro takeover from Romtelecom
Number of customers: more than one million.
83 per cent were prepay customers at end-September 2005
Network coverage: 95 per cent of population, 82 per cent geographic coverage at end-2006
18 corporate stores, has a network of 600 sales points, through partners 2006 3Q revenues: 26.5 million Euro
2006 3Q EBITDA: - 46.3 million Euro
2006 3Q net income: - 66.2 million Euro
2006 3Q blended ARPU (average revenue per user): 6.2 Euro