Strategic decisions, especially when of relative proportions, are often scrutinized and criticized merely on face value. A closer ― and more insightful ― look might just reveal their true value.

When, back in 2000, COSMOTE started operations in Albania, its decision met with skepticism from a part of the market. Last year AMC, COSMOTE’s subsidiary in neighboring Albania, posted revenues of 137.6 million euros with its profitability margins ranking among the highest in Europe.

Recently, in 2005, COSMOTE assumed yet another challenge, by taking over COSMOROM, OTE’s mobile telephony arm in Romania, which had so far failed to penetrate the local market. Voices against this move were aired on this occasion as well. In record time, COSMOTE Romania relaunched operations and within only a short period its presence was made evident in the Romanian market. Having attracted over half a million customers in six months, the company continues to make significant inroads and is gaining an increasing share of new subscribers.

Similar business stories in Bulgaria and the Former Yugoslav Republic of Macedonia (FYROM) make up a diverse and interesting portfolio, whose future success has played a significant role in COSMOTE’s decision to acquire Germanos. 

So what exactly is going on with the Germanos acquisition by COSMOTE?

To find out the truth, one just has to connect all the parts of the story in the markets where COSMOTE operates. Not many observers have grasped the undeclared battle for the SE Europe market of 46 million subscribers or the Greek operator’s plans to play a leading role in the region. OTE’s offspring has grown up and, with its revenues having reached 1.8 billion euros at COSMOTE Group level for 2005, aspires to attract many more than the approximately 10 million subscribers that it currently has in SE Europe.

The boost that the acquisition is expected to give to COSMOTE’s operations in the Balkans cannot be ignored. Germanos is the second-largest commercial network in Bulgaria and among the largest in FYROM, while at the same time it is rapidly developing in Romania, where it is the most recognizable and established brand in the sector, based on local research. COSMOTE, having thoroughly analyzed the needs of each and every one of its subsidiaries, weighed in favor of the decision to go ahead with the Germanos deal. With this move, COSMOTE acquires not only the largest and fastest-growing retail network in the SE Europe telecommunications and technology market, but also the possibility to materialize an aggressive strategy for expansion; through the strong Germanos network in Greece, Romania, Bulgaria and FYROM, COSMOTE is building a substantial lead over its competitors in the region’s market. Following the acquisition, COSMOTE’s real challenge will be to find the most efficient road to capitalizing on the Germanos brand and its remarkable dynamics in all respective markets.

Though the deal has attracted attention, not always for the reasons COSMOTE believed it would, the operator is set on completing it and moving on with its expansion plans. Standing in contrast to the Cassandras is the majority of the international investing community that has received the news with a positive outlook. Major investment groups, such as Morgan Stanley, Deutsche Bank, DrKW and Marfin, have pointed out the transaction’s ‘strategic sense’ or ‘insightful’ character, while forecasting the acquisition’s positive impact at all levels in the markets where the COSMOTE Group operates.

COSMOTE’s financial figures, steadily positive after the announcement of the transaction, bear witness to the group’s growth track. Through its performance, COSMOTE displays its dynamics while anticipating that the Germanos acquisition will add value from the very first year of consolidation that will gradually increase over the coming years. Forecasts concerning the Germanos acquisition are also endorsed by Lehman Brothers analysts, estimating that there will be a positive contribution of 8-10 percent in the profits per COSMOTE share during the first three years. 

An opportunity lost is one that never existed in a fast-evolving and demanding global market. COSMOTE has so far proved its ability to adapt, move fast and progress. Maybe, just maybe, it is worth giving the Greek mobile operator the chance to prove whether the acquisition of Germanos will be yet another successful venture in its history.

By Dr Marilena Fatsea
Marilena Fatsea is COSMOTE’s corporate affairs director.

COSMOTE website: www.cosmote.gr