Building up a basic need
While Romania’s telecom market offers a blueprint for successful business development in a fast-paced liberalising economy, Corina Mica talks to Liliana Solomon, CEO of Vodafone Romania, about the firm’s plan to regain its position as local market leader
Why has the local mobile telecom market developed so well?
The answer could be a lesson for other industries active in Romania, if they are willing to listen.
“One reason is that the landline infrastructure was underdeveloped, with a penetration rate of just over 25 per cent,” says Vodafone Romania CEO Liliana Solomon. “Communication is a basic need, and in this country we can all remember how long it took to get the state telecom company to install a phone line in your home. This could not continue, as communicating is essential today – so any kind of alternative was welcome.”
The CEO argues that mobile telecom operators also developed the market due to huge investments from private companies with an entrepreneurial spirit.
“The whole network deployment was thus made easier and quicker, and once people realised mobiles were easy to use and it gave them access to communication, together with the drop in prices for handsets, it had all the chances to develop,” she says.
But now, it is not that simple to run a mobile phone company in Romania. It is not just a case of taking a list of services that have appeared in the west and dropping them into the market at the moment the competition is finalising its advertising strategy for similar products: some markets cannot be dictated to and Romania, it seems, is creating its own powerful consumer identity.
“In Romania people do have choices,” says Solomon. “Customers are more and more sophisticated. They know what they want to have. It would be arrogant of any operator to say it knows better than any consumer.”
Now around seven out of ten Romanians have a mobile phone.
“It is not a 100 per cent penetration rate because Romanians’ disposable income is low compared to western European countries,” adds the CEO. “Buying a mobile phone is only a matter of price and, in terms of this country’s social make-up, about 40 per cent of the people lives in rural areas. It will take time and money to reach 100 per cent penetration.”
Despite being a native, Solomon has been back for only ten months as head of the largest UK investment in Romania.
How does Vodafone Romania compare to other countries where the telecom giant entered, just one year after?
“Paul Donovan, Vodafone chief executive for central Europe, Middle East, Asia Pacific and affiliates says that the performances of the Romanian operations was 17 per cent higher than in the company’s business plan,” says Solomon. “This says the business performed very well, we had a solid business, and this recognition is a great compliment.”
Although competitor Orange has a higher number of customers, Solomon argues that Vodafone is still the market leader in the business segment in Romania, based on revenues.
“We recovered and were able to regain our leadership on the business segment,” she adds.
Last year the company was the first to launch locally the third generation (3G) service, which includes video telephony. Now the network is present in 22 cities with more than 135,000 customers. Competitor Orange launched its own 3G service last June.
“We are happy with its development, and the rate at which it was accepted is a signal that the market is open to adopt new applications,” she says.
With the Government putting up for sale the remaining two 3G licenses by the end of the year, this could only mean further development.
“Cosmote might buy one licence, and it would be a normal evolution,” she says.
As the largest British investor in this country, delegates from Vodafone Romania visited President Basescu and Prime Minister Tariceanu, where they discussed what role the telecom industry should play in the nation’s development.
“In today’s global business, money flows to a country with the biggest return on investment,” she says. “The truth is that Romania competes for foreign investment in a global economy with other countries that understand and support the commitment of a large corporation.”
One example against such action is the recent enforcement by the National Regulatory Authority for Communications (ANRC) to lower interconnection tariffs (the costs operators pay to one another when a customer makes a call across networks) to 5.03 Euro cents per minute by 2009 from the existing 8.13 Euro cents per minute.
“We believe actions like this can endanger Vodafone’s long term planned investments, which will have negative effects on the entire mobile communication industry in Romania,” she says. “As an example, the European average interconnection tariff was 12.79 Euro cents per minute in 2005, and in Bulgaria, which is a similar market to Romania, the tariff stands at 19 Euro cents per minute.”
Largest British investor in Romania
WHO IS LILIANA SOLOMON?
Born in the Transylvanian city of Cluj-Napoca, Solomon decided to leave Communist Romania in 1989 and head for Germany, where she studied at the University of Dusseldorf.
“It was difficult to imagine things would be different when I left,” she says. “I decided to take my destiny in my own hands. I had the guts and the opportunity.”
After graduation, Solomon worked with IBM in IT development. Then she studied an MBA in France before joining German telecom start up o.tel.com - a joint venture between utility company E.ON and RWE, at that time the third largest telecommunications company in Germany. Next up she joined communications giant Deutsche Telekom and never left the communications industry.
“After graduating from my MBA I received four offers, and decided to join the telecom business because it was an industry that had great development potential,” says Solomon. “This was happening before the telecom market was liberalised in Europe, and it was plain to see that huge changes would occur. There has never been a moment in which I regretted that decision.”
Part of the attraction for her is the combination of hi-tech machinery and innovation with a strong marketing dimension.
“I am not aware of any other industry where such a mix exists to this extent,” she says.
As for her biggest professional success before being appointed to Romania, this was when, after Deutsche Telekom bought UK-based One2One, the fourth largest British mobile operator, the American CEO asked her to become CFO of the company.
“It was a successful turnaround, an interesting experience, as I became known on the UK market. We doubled our revenues in two years’ time and turned the company into a four billion-GBP business.”
Solomon says her main aim in the current position is for the company Vodafone Romania to become a role model for doing business in this country.
“I like everything about the job I’m doing,” she says. “I like being challenged, I like trying new things. 3G is a new territory, a new service, new technology, even a new energy. But if you don’t pay attention, success can turn into a threat.”