Market Watch

Romania to Sell its Stake in Romtelecom


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The Romanian government wants to sell its remaining 45.66 per cent stake in Romtelecom, the incumbent telco which is also a leading player in pay TV.

Greek telecommunications company, OTE, which owns 54.01 per cent of Romtelecom's shares, has been invited to make a bid. The government is also condsidering an IPO for its stake, which it values at €1bn.

In addition to fixed line telecommunications, Romtelecom offers satellite TV (Dolce TV),  IPTV (launched at the end of 2009 under the brand Interactive Dolce), and cable TV (through its subsidiary NextGen). At the end of September 2010 Romtelecom had over a million TV subscribers to its Dolce services, most via satellite TV (982,000), with over 160,000 cable TV subscribers. Romtelecom also offers internet and mobile telephony (over a CDMA network).

Romtelecom's revenues were €807.7m in 2009  (down from €869.9m in 2008) and the telco made a net loss of €34.6 million. Total net debt was €142.8m.

Analysis
Following a process of privatisation which started in central and eastern Europe in the 1990s, most of the incumbent telcos in the region are controlled by private investment groups, with the exceptions including Russia, Ukraine, Latvia, and Serbia, although in Latvia and Serbia private groups have made some investments (Telia Sonera holds 49 per cent of Lattelecom, and 20 per cent of Serbia Telecom is owned by OTE).

The Romanian telecommunications market is one of the most competitive in the region, with no less than five satellite TV operators, two large cable TV players, (UPC and RCS&RDS - both challenging Romtelecom also in the telecommunications sector), and about 500 small cable TV providers, not to mention two IPTV operations. ARPU figures are, however, among the lowest in the region.

Due to a difficult economic situation, the Romanian government recently decided to postpone analogue switch-off by two years to January 2015 and believes it can raise some much-needed funds by selling its share in Romtelecom.

However, it is doubtful that it will be able to get the price it is seeking. When OTE bought 35 per cent of Romtelecom's shares in 1998 it paid $675 million (about €600 million at the 1998 exchange rate) and $273 million (€240 million) when it increased its shares to 54 per cent in 2003. It is unlikely that OTE, itself 30 per cent owned by Deutsche Telekom, would invest another €1bn. Romtelecom's strong position in the Romanian telecommunications market makes it an attractive investment, though at a lower price.

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