Telenor Purchases Bulgarian Mobile Unit Globul

Hard times are hammering down everywhere. The economy is struggling in most parts of the world. Greece is no exception. Hellenic Telecommunications Organization, known better by its Greek initials OTE, is one Greece’s largest telecommunications providers. It is active in Greece, Bulgaria, Romania and Albania. Deutsche Telekom is one of the largest shareholders in OTE.

Enter into the mix Norway’s largest telecommunications company, Telenor Group. It has operations in Scandinavia, Eastern Europe and Asia. In 2010, it was listed as one of the largest mobile phone operators in the world.

Somewhere in the neighborhood of 28 percent of Telenor’s revenue is generated outside of the Nordic region. It has been pushing hard into some of the faster growing areas in Europe and Asia to enhance its sales.

Recently, Telenor agreed to buy OTE’s Bulgarian mobile unit, Globul, for about $934 million. Globul has been in Bulgaria since 2001, at the end of 2012, the carrier had 4.5 million subscribers.

In 2011, Globul’s network covered roughly 88 percent of Bulgaria’s population and a majority of the country’s territory. However, today it has about a 36-percent share of the market.

The purchase of Globul allows for two things to happen. First, it increases Telenor’s presence in central and Eastern Europe. At the same time, it helps OTE in a time of finance need. The loss of Globul means that OTE can reduce its costs. OTE reported a fourth quarter net loss of about $57 million.

In a statement, Jon Fredrik, CEO of Telenor, said, “Based on our experience in Telenor’s well-performing operations in the region, we strongly believe that we will be able to create value in the Bulgarian market.”

Ovum provides its clients with independent and objective analysis. Its research is based on independently audited procedures. Jeremy Green, principal analyst in Ovum’s Telco Strategy Practice,had his own comments about Telenor’s acquisition of Globul.

“Telenor’s acquisition of Globul, Bulgaria’s second-largest mobile operator, represents a continuation of the group’s policy of seizing opportunities without too much concern for geographical or strategic fit. There’s no obvious logic to the acquisition, other than the fact that Bulgaria sits next to Serbia, another Telenor territory. The Telenor operator in the latter is delivering a decent margin compared to Telenor’s overall footprint, but most of the group’s growth is coming from the Indian subcontinent,” Green said.

He followed this by saying, “Bulgaria is a largely saturated market (141% penetration) with little prospects for revenue growth. It is possible that Telenor will be able to shape and improve Globul’s market share and position, but there is no guarantee of this, and these sorts of gains are hard to sustain in most markets. The largest competitor, Mtel, is also owned by a European operator group (Mobilkom Austria), so growth at its expense will not be easy.”

OTE has cut its staff and sold international assets to reduce debt. This unfortunately is due to Greece’s recession. It lowers the need and demand for OTE’s products. Right now, the demand for the notes that OTE owes is much higher than its supply.