Another interesting piece of news from today was Romtelecom's payment of about $24m in debt for Cosmorom - its mobile operator. The money went to Alphabank ($10m out of $24m) and ING ($14m out of $15m). Presently, Romtelecom, which is the main Romanian telecom provider, is screening for an investment bank that supposedly would find a buyer for its bankrupt mobile operator.

Romtelecom doesn't appear to be in a favourable position since the market deregulation in January 2003. While the European telecoms announce higher results for Q42003 and estimate promising returns in 2004 (mainly from mobile operations and broadband), the Romtelecom's fixed line business unit and the main revenue driver is facing tough competition from the newly emerged players (mostly VOIP-based). In 2002 Cosmorom, the mobile service provider, lost about 35% of its customers, with losses of some 20m euros. In 2003 the operational losses were about 5 mil. euros. No news from the broadband segment, neither in the past nor in the future.  Shareholders publicly announced that they won't invest a single cent in Cosmorom (that is basically the reason of the bad shape) and consequently started looking for a divestiture. The process prolonged though, and officials announced to take a decision sometimes next month. Now, the question is: is the effort worth?

Well, the mobile business environment in Romania is quite competitive with two main GSM players having about 6 million subscribers - Connex and Orange. Also, in  2001 a new mobile company - Zapp - operating under the CDMA standard was launched, but the market acceptance doesn't seem very impressive. In this context though, there are about 3 more million subscribers to fight for, so the market potential is there. In addition, the rate of increasing subscribers was one of the highest in Europe in 2003. As such, Cosmorom appears to have good chances of grabbing some market share in the turnaround case and become the revenue engine for Romtelecom. Perhaps finding a strategic partner would be a wise decision for the turnaround, especially because of the necessary expertise in the infrastructure investments. Otherwise the perspectives are grim, Romtelecom would probably have to reconsider its entire strategic positioning in the Romanian market.