IHS Global Insight Perspective | |
Significance | As expected, Romania's competition council has given the green light to mobile operator Cosmote's purchase of Zapp, its smaller rival. |
Implications | Adding Zapp's niche clientele to Cosmote's client base, which currently gives it a market share of around 21%, changes very little in the dynamics of the Romanian mobile market. However, through the takeover the operator finally gains a licence to run 3G services, which is something it has thus far lacked. |
Outlook | For Cosmote, the launch of mobile data services will enable the operator to boost the saturating voice segment's dragging effect on ARPU. Going forward, we also expect the competitive environment as a whole to benefit from the acquisition, since as part of OTE Cosmote is likely to be able to better match Orange's and Vodafone's network investments. In the meantime, the anticipated liberalisation of 900-MHz and 1,800-MHz bands for data should give a major boost for 3G deployments outside cities. |
Romania's competition council has approved the takeover of mobile operator Zapp by OTE's local mobile unit, Cosmote Romania. In its analysis, the authority concluded that the deal is unlikely to lead to an establishment of a dominant position in the relevant markets and does therefore not violate the Romanian competition laws.
Outlook and Implications
- All Clear for Transaction: Cosmote and Zapp's owner, Saudi Oger, announced the agreement on a 207-million-euro (US$292.5 million) acquisition in late June this year (see Romania: 1 July 2009: Cosmote Romania Agrees to Buy Zapp for 207 mil. Euro, Gains 3G Licence). The antitrust approval is largely expected, given that the opinion submitted by the country's telecoms regulator, ANCOM, to support the competition authority's analysis was also in favour of it (see Romania: 7 July 2009: Romanian Telecoms Regulator Says Cosmote's Zapp Takeover Legal). The largest players of the Romanian mobile sector—for which IHS Global Insight an end-2009 penetration rate of 128.4%, out of the total of 27.274 million subscribers—are Orange and Vodafone, with respective market shares of 36% and 33%, followed by Cosmote's and its 21%; the fourth biggest carrier is quad-play operator RCS&RDS, which provides services to around 9% of the sector. A CDMA carrier with also a 2.1 GHz UMTS network, Zapp's subscription base accounts only for around 1% of the total, which understandably does not pose a competitive obstacle for the acquisition.
- Cosmote's Much-Needed 3G Entry: More importantly, besides acquiring Zapp's niche clientele, through the takeover Cosmote also purchases the smaller operator's 3G licence and network. This has a great value for Cosmote, since it has thus far lacked a 3G licence of its own, which with the voice segment maturing has seriously limited the company's options for boosting ARPU. The integration of Zapp's network, which in July became the first in Romania to provide HSPA+, essentially allows Cosmote seek further growth from the emerging mobile broadband market(see Romania: 24 July 2009: Zapp Offers 21.6-Mbps Mobile Broadband with HSPA+ Launch and Romania: 4 September 2009: Vodafone Romania Launches HSPA+ in Bucharest). As such, the competitive impact of the acquisition may in fact be positive for the Romanian telecoms sector as a whole, since all major operators have now the capability of providing data offerings to their customers. Part of the Deutsche Telekom group since last year, Cosmote's parent OTE should have more clout than Zapp to match Vodafone's and Orange's network investments in the long run. In the meantime, we expect the regulator—in line with the European Commission's recently revised GSM directive—to begin working on the liberalisation of the 900-MHz and 1,800-MHz frequency bands for data, which would give a major boost for the operators' deployments outside large cities. The sector watchdog has also hinted that as part of the process it may licence a fifth entrant (see Romania: 8 September 2009: Romanian Regulator Ready to Reorganise Spectrum for New 3G Entrant).