América Móvil became majority (59.7%) owner of Telekom Austria in 2014, in a bid to extend its reach to Central and Eastern Europe. In August, the Latin American giant elevated its own hire Alejandro Plater to CEO to execute its vision. TelecomFinance’s Guy Ferneyhough spoke to Plater to find out how the company is faring in its markets: Austria, Belarus, Bulgaria, Croatia, Liechtenstein, Macedonia, Serbia and Slovenia.
América Móvil became majority (59.7%) owner of Telekom Austria in 2014, in a bid to extend its reach to Central and Eastern Europe. In August, the Latin American giant elevated its own hire Alejandro Plater to CEO to execute its vision. TelecomFinance’s Guy Ferneyhough spoke to Plater to find out how the company is faring in its markets: Austria, Belarus, Bulgaria, Croatia, Liechtenstein, Macedonia, Serbia and Slovenia.
Guy Ferneyhough: You have been CEO for only a few months, how are you finding the role?
Alejandro Plater: It’s very interesting, a great company with great people. We’re investing a lot in developing infrastructure, and focusing on operational performance, launching new products, and growing organically in our markets.
GF: You had been COO for five months before taking over as CEO – I imagine that must have been a good way to get a feeling for the business before taking on the top job?
AP: Yes, it was good for me to spend some time looking at the processes and how the operations and company were run, so I could understand the challenges and the opportunities. It was a very good period that helped me understand where to focus. I’m making the company more efficient, investing where we have a good business case, and fixing operations – especially outside Austria, where we were struggling a little bit.
GF: How’s the relationship with América Móvil? Are they quite hands-on?
AP: They like to be involved, they are always trying to find synergies, trying to find ways to procure better, and to use the leverage of América Móvil to gain better conditions. América Móvil is a big company and when you’re discussing deals with vendors, they feel the pressure of being part of something bigger. América Móvil has been very instrumental in executing that strategy to get efficiencies in purchases.
GF: What are Telekom Austria’s main strategic objectives?
AP: Today we want to consolidate our operations within our current footprint, that’s priority number one. We also want to improve the performance of some of our operating companies where we’ve not had great results in the last few years, and focus on investing in Austrian infrastructure. We are investing close to half a billion euro in 2015 in Austria, and will continue that level of investment in 2016.
GF: Is that Austrian investment more on the mobile side or the fixed?
AP: On the mobile side we will make a big investment to improve coverage, particularly in LTE, as well as continuing with our fibre rollout. I would say that the fibre rollout is our main priority in Austria. We have been executing on this in 2015 and are ahead of schedule, and now plan to accelerate our fibre rollout even further.
GF: Carlos Moreno, the CFO of América Móvil, has previously compared eastern European telecoms markets to those in Latin America a few years ago – is that a comparison you recognise?
AP: If you look at eastern European countries there is still room for consolidation, and we consolidated a few companies during Q3. We acquired Blizoo, a cable company in Bulgaria, and there is room for more consolidation, particularly in cable. In Bulgaria, nearly 50% of cable subscribers are with smaller operators that I think over time will be consolidated – similarly to what occurred in Latin America many years ago. There’s a lot of consolidation to be done in our footprint, especially in cable.
GF: In how many markets do you offer mobile and fixed?
AP: We are mobile-only in Serbia [Vip Mobile] and Belarus [Velcom], and are already converged in the rest of our markets. In Slovenia [Si.mobil], we acquired convergence platform provider Amis, which is also present in Croatia.
GF: Why is fixed-mobile convergence so sought after at the moment?
AP: I think it’s critical for us because we want to be the single point of contact for telecoms services for all our customers. In order to do that and create more stickiness we need to come to the market with a converged proposition, so households can buy all their telecoms products from one vendor: us.
We believe that customers are satisfied with our product and they can acquire fixed solutions, TV, mobile and other services like security – we hope they would be less tempted to churn because they would be satisfied with what we are delivering.
GF: What about your presence in other geographies?
AP: Croatia is okay. We are growing pretty fast in fixed, there’s lots of focus on that. We paid a lot of tax there last year because of a new fee on spectrum, so we suffered a bit, but we are happy with how we are developing. Still, there is a competitor [Deutsche Telekom-owned Hrvatski Telekom] that is very strong and very big.
In Serbia, we are mobile-only and competing with a converged operator, Telekom Srbija, which the government tried to sell. We need to find a good convergence opportunity. In the meantime, we are happy and able to compete. There is another mobile-only player [Tele2], so we are not alone.
GF: Would you remain in a market where you were mobile-only, with no good opportunity to buy fixed?
AP: I think so. We see many countries with mobile-only players that perform well. Of course I would prefer an operator to be convergent, but the mobile-only game can still be played well.
GF: What’s the situation in Belarus? That seems to be a challenging market.
AP: Belarus is similar to Serbia. There is one player that is convergent and state-owned, the former PTT Beltelecom, and then it is us and Turkcell, which is also mobile-only, with a small market share of 10%-12%. The fixed market is divided into a quasi-monopoly situation in different regions: there is a cable company in Minsk and others throughout the country. Most of them are owned by either the state or local municipalities.
GF: Is there potential for privatisation?
AP: Not that we can foresee now. It’s a government decision and as far as I know, there is no formal plan to privatise.
GF: Are you looking at entering new markets, in Eastern Europe or further afield in markets such as Eurasia?
AP: We are looking at opportunities, but nothing concrete. We are just screening the market and that’s it. The focus remains on consolidation within our existing footprint, prioritising convergence in our two mobile-only markets.
GF: Moving back to Austria, how has the mobile market changed since 3 acquired Orange Austria, reducing the market to three players?
AP: In Austria we are making big investments in both fixed and mobile – we are on target to cover 90% of the population with LTE by the end of next year.
In mobile, the low end is populated by lots of MVNOs. Every week, every month a new MVNO comes onto the market. We are watching that segment, but it is still quite small on the revenue side.
We play in the high value segment, focusing on providing better services to our customers. We are investing a lot in infrastructure, shops, improving coverage and building more coverage.
GF: The EU competition commissioner Margrethe Vestager has questioned the link between in-market consolidation and investment, and the argument that shrinking the market drives greater infrastructure investment by the remaining operators. Since the four-to-three consolidation in Austria, has it become easier for you to invest?
AP: We increased our capex by 20% in Austria between 2014 and 2015, and will maintain that level of investment in 2016. This situation has given us greater flexibility to invest more, and we plan to invest even more.
GF: How do you assess the Commission’s stance on consolidation?
AP: We like to invest in infrastructure. For that, there needs to be a business case. If there is not a good business case to invest, then it is difficult to get approval for investment. Today we see a good business case to invest and we are investing heavily in our fibre rollout. I think Austria is a good example to show that in our case, Telekom Austria is now investing much more.
GF: Do you think that the regulatory environment is changing in Europe?
AP: The decision to scrap roaming fees from next year will create a lot of pressure. The more regulated we are, the greater the impact on profitability and our flexibility to invest. I think that the new roaming rules reduce our flexibility to invest, even though our investment is at an all-time high in Austria.
GF: What areas of regulation would you like to see changed?
AP: I would like to see regulation that is even handed for all players. We send video on demand content in Austria and other countries, and iTunes does the same. We are regulated, iTunes is not. There are termination rules applied to our contracts but not to iTunes.
On top of that, think about our operations in Austria, we have shops, we are creating jobs in Austria, and we have German-speaking call centres. If you download a movie from our platform and it doesn’t work you have somewhere to call, and if you are charged incorrectly then you get your money back. With iTunes you have no one to call. We pay taxes in Austria, we are based in Austria, and we have our headquarters in Austria. If video on demand is regulated, it should be regulated in the same way for all players. It’s the same for web storage services.
GF: Does it make sense for Telekom Austria to get involved in content?
AP: No. For it to make sense to produce your own content, I think you must be able to distribute it widely. Netflix has 70 million subscribers, so of course they can produce their own content and distribute it.
GF: Do you think the government will sell its remaining 28.42% stake in Telekom Austria?
AP: To be honest I don’t know. I’m not involved and cannot comment.
