Minister of Transport and Communications Christos Verelis Greek Government photo

Greece has entered the 21st Century with a fully liberalized telecommunications sector, having in 2000 finally terminated the monopoly of state-run OTE, the Hellenic Telecommunications Organization, on fixed-line services and opened the market to new players in all areas of the industry.

Greece's telecom market is "liberalized completely," says Minister of Transport and Communications Dr. Christos Verelis. With five licenses for fixed-wireless service providers issued in December last year, competition began to heat up, and "the game became interesting," says Verelis.

Already in the early 90s, two mobile licenses were offered to private sector companies, and Telestet and Panafon became hugely successful ventures. They were later joined by a third operator, Cosmote, set up by OTE, and in July the government will auction four third generation (3G) mobile service licenses, with the three current mobile operators expected to win licenses and be joined in the market by a fourth.

The creation of the mobile telephony companies was a revolution of sorts in Greece, attracting large investments and generating big profits, all despite a sclerotic government bureaucracy, says Panafon CEO George Koronias.

Having run the company since its founding in 1992, Koronias says that his industry has grown at a clip of 60 percent a year, compared to annual GDP growth of 3.5 percent, on average. Today mobile phone penetration is over 60 percent of Greece's 11 million people. Panafon is the market leader in Greece, with 45 percent of its shares held by Britain's Vodofone.

The success in the private sector spurred the state-owned and operated OTE to improve its services. It now takes a couple of days to get a new phone in Greece, whereas a decade ago it could take years.

However, despite deregulation of the market as well as privatization of OTE (as mandated by the European Union), the giant company is still in a dominant position and making huge profits. It has also embarked on an aggressive expansion program in neighboring countries.

To satisfy EU directives, in April this year the Greek government announced it would unload 15 percent of OTE stock to reduce the state's stake from 51 to 36 percent, offering 10 percent to banks for warehousing for up to three years, and a further five percent as convertible bonds.

This move was made following attempts last autumn by Credit Suisse First Boston and UBS Warburg, advisors of the Ministry of National Economy, to identify potential strategic investors, to take up the 15 percent stake on offer.

The official at the Ministry of National Economy responsible for privatizations, who didn't want his name used, says that the Greek government was willing to discuss offering management control of OTE as part of a deal with an investor, but at that time the climate was less than encouraging, given that the global telecommunications industry has been hammered by nose-diving share prices.

Only two of 11 companies approached on behalf of OTE responded, and neither of those followed through on their initial interest.

But Nikos Manasis, the chairman and CEO of OTE, has stated that should the global situation for telecoms pick up over the next year or two that the convertible bonds and warehoused shares, to be sold to banks for some $1.1 billion, may then be placed to a strategic investor.

In the meantime, Manasis says OTE will continue with its current strategy of consolidating its international holdings and reorganizing its internal structure.

Nikos Manasis, Chairman and CEO of OTE OTE photo

"We will proceed alone, with our own strengths," he says.

In late May parliament was expected to vote on a bill that will finally shift control of OTE away from the government, with the chairman and CEO being elected by the general assembly of the company rather than appointed by the government.

Since taking over OTE last June, Manasis has begun to reorganize the company.

He has established an executive committee for the better co-ordination of the Group's subsidiaries and has stated that he plans to modernize the structure further by putting one person in charge of all OTE holdings in each of the main market areas OTE is involved in, such as fixed line services, mobile telephony, Internet services, etc.

Under the new system, the six OTE mobile service companies, for example, will be under a single management, even though they are scattered over several countries, and each company will operate autonomously.

These new operational heads will be responsible for OTE's companies in Greece and abroad in their area, and report to the chairman of OTE.

Manasis put forward this move because OTE was increasingly becoming unwieldy to manage, especially given its considerable holdings in neighboring countries.

OTE owns 20 percent of Telecom Serbia, 90 percent of Armenia's ArmenTel, and 35 percent plus management control of Romania's RomTelecom (its most profitable foreign possession).

In December last year an OTE-lead consortium won the 2nd GSM license in Bulgaria.

After taking OTE's helm, Manasis decided that any new acquisitions in the region would be re-directed to mobile-related services, given the high costs and difficulties of developing fixed-line services.

One of his main priorities now is to develop high-growth areas, such as those based on the Internet, electronic trading and business-to-business services.

OTE already owns the largest ISP in the country, OTEnet, which in April linked up with Yahoo to improve its portal offerings.

In Greece, after a bumpy start, OTE launched the third mobile service, COSMOTE, which Manasis is credited with leading to success when he took over the company in February 1998. It now is competing with Panafon to lead the market, making it the most successful third-license mobile provider in Europe.

COSMOTE, whose main shareholders are OTE with 59 percent and Norway's Telenor with 18 percent, in August last year purchased 85 percent of Albanian Mobile Communications (AMC).

In 2000 OTE revenues grew 10.7 percent over 1999 to $3.2 billion while net income grew to $560 million.

Based on the sale price of the 15 percent tranche being off-loaded by the government, OTE's current market value is about $7.2 billion.

OTE has trimmed its work force by 3,300 to 19,500 in 2000 and expects this figure to drop to 18,400 by the end of this year.

In March this year, Standard and Poor boosted OTE's long-term credit rating from A- to A, showing confidence in the company's performance and strategy despite deregulation and privatization.

All indicators point to OTE continuing to play a dominant role in domestic telecommunications as well as a growing role in the regional market as it consolidates and expands its investments in the area.

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