The Greek telecommunications market remains challenging for all participants, with only continued robust demand for broadband and - interestingly - converged service packages providing the only tangible growth. Besides subdued consumer and enterprise spending power resulting from the government's austerity programme, European Commission-mandated termination rate cuts are squeezing operators further. It is, therefore, not surprising that consolidation among the leading alternative operators seems likelier than ever, with WIND Hellas increasing its stake in ForthNet and an eventual merger of the two considered likely to tempt cash-rich, growth-challenged Vodafone to reconsider acquiring WIND. With incumbent OTE deploying its next-generation VDSL broadband network and enjoying faster pay-TV adoption, the other operators are firmly placed on the back foot and consolidation must surely look more appealing.
- Mobile subscription addition rates were stronger in Q313 than had been expected, possibly as a result of price cuts and a fresh emphasis on low-cost prepaid services, but equally possibly due to customer migration to 4G mobile broadband services. Subscriptions increased by 1.7% y-o-y to 15.508mn.
- However, operators may be holding onto a large number of technically inactive mobile subscriptions and it is increasingly likely future quarters will see sudden slumps in the total number of registered subscriptions as inactive accounts are closed.
- The inclusion of inactive or rarely-used subscriptions weighs on ARPU figures disclosed by operators. Surprisingly, Cosmote outpaced Vodafone in blended ARPU in Q313, with the latter recording ARPU erosion linked to termination rate reductions, as well as a winnowing of its subscription records. BMI forecasts ARPUs to continue declining as part of an overhaul of all our forecasts, which run from 2014 to 2018.
Key Trends & Developments
ForthNet shareholder Cyrte Investments sold its 27% stake in the alternative operator in 2013, giving minority investor WIND Hellas the opportunity to increase its ownership to 33% in December 2013. Primary shareholder EIT responded by raising its stake to 44% in January 2013. WIND recognises that an expanded fixed infrastructure footprint is necessary if it is to compete with OTE's VDSL offering and may be eyeing ForthNet's popular Nova TV service as a way to become a converged services provider. A merger of WIND and ForthNet looks increasingly likely, although WIND's complex debt structure could deter EIT and other ForthNet investors. Should a deal be reached, we believe it is possible Vodafone would reapproach WIND, with a view to building Greece's largest alternative player, a move that would emulate its strategy in other markets such as Germany.