Romania’s telecom market is highly competitive as there are several big players of similar strength. This makes the local telecom services significantly cheaper than in other European markets. However, this also affects the profitability of the telecom companies and will probably lead to market consolidation in the following years, according to Miroslav Majoros, the new CEO of Romania Telekom, the biggest local telecom group.

“The market in Romania is extremely competitive and the telecom service prices are much lower than in Slovakia,” Majoros, who was CEO of Slovak Telekom from 2003 until 2015, said in a meeting with the press. “The market structure, with several equal players, poses much bigger challenges than anywhere in Europe,” he added.

This makes it very hard for telecom players to maintain high profit margins and carry on big investments. “The profit levels are not very big when compared to the size of the country and some players may not be happy about that. I think that in the next three years while I’m here we will see a consolidation in the telecom market,” Majoros said.

The Slovak executive, who took over as CEO of Romania Telekom in January this year, replacing German Nikolai Beckers, says one of his biggest challenges stopping the group’s profitability decline in Romania while continuing to invest massively in infrastructure and services.

Telekom Romania had total revenues of EUR 1.04 billion in 2015 slightly lower than in 2014, but the operational profit before amortization and depreciation – EBITDA went down by 23%, to EUR 205 million.

Telekom Romania has an investment plan worth over EUR 180 million this year, most of which will go into developing the fixed and mobile networks. The company aims to increase its fixed broadband internet coverage (fiber-to-the-home) by 30%, to 2 million households by year-end. It will also continue to invest in modernizing and expanding its 3G/4G mobile networks.

Telekom also signed a deal with Orange Romania, the biggest local mobile carrier, which allows it to use Orange’s 4G network. At the same time, Orange will use Telekom’s fixed broadband network and thus be able to offer fixed broadband internet to its customers. The 5-year deal will allow the two companies to strengthen the segments where they are not very strong. Telekom Romania has a limited 4G coverage (only a third of Romania’s population, compared to Orange’s 72%) while Orange has no fixed network.

“The implementation is quite complicated. The first pilot project based on this agreement will be launched in a few weeks,” Majoros said.

The new Telekom Romania CEO will also focus on improving the customer services by further training the employees working in stores and contact centers. There will also be some personnel adjustments, but no major layoffs, according to Majoros. “The cost of labor in Romania is still low, so it doesn’t make sense to automate some activities if we have skilled people to do them,” he explained.

On the commercial side, the group will continue to push the MagentaONE fixed-mobile service packages. At the end of last year, Telekom Romania reached 208,000 MagentaONE customers.

Telekom and RCS&RDS are currently the only two local players that offer both fixed and mobile services. Orange and Vodafone only offer mobile services while UPC Romania only has fixed services.

Andrei Chirileasa, andrei@romania-insider.com