Jun 27, 2003
Interview: Cosmofon CEO Nikolaus Avgerinos
In September 2001, Greek telecommunications giant OTE paid almost 28.5 million euro for Macedonia’s second mobile operator license. Various legal challenges and disputes meant that the new company — Cosmofon — was launched only 12 days ago.
The man picked to head Cosmofon is Nikolaоs Avgerinos, a PhD in electronics with a decade’s experience in GSM service set-up, with Vodafone (from 1993-2001) and OTE (2001 to the present). At Vodafone, he oversaw the launch of Greece’s first GSM service (Panafon). His integral role in developing Greek telecommunications involved directing operations, while serving on Panafon’s executive board until 2001. Dr. Avgerinos led afterwards the launch of Click GSM in Egypt and assisted from Greece the establishment of Vodafone subsidiaries in Kenya and Hungary. Under his direction, Panafon won Albania’s second operator license and began competition with Albania’s other mobile operator — owned by Cosmote, the mobile subsidiary of Dr. Avgerinos’ present employer.
In April 2001, Dr. Avgerinos joined OTE and was made CEO in Bulgaria, where he launched Bulgaria’s second mobile operation, GLOBUL. By December 2002, this operation had gone from nothing to 500,000 subscribers. Since December, he has been directing Cosmofon’s operations in Macedonia.
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Q: Dr. Avgerinos, how was it that you were chosen to come to Macedonia?
A: In December 2002, I was asked to lead the Macedonia operation. My mandate was to solve all problems as quickly as possible. We are very proud to say that we did it all in less than 6 months. Now, we have initial coverage of 60 percent of Macedonia, or 70 percent of the population. This is very decent opening coverage. At least in my experience, it is the most decently covered of any operation at the time of launch. Remember, we’ve had to do everything from the ground up. We are very optimistic that Macedonia will be a very successful operation.
We set ourselves high targets, as we had a well-established competitor. We utilized heavily OTE’s support and the technical expertise of Cosmote, OTE’s mobile operator in Greece. We’ve started with 77 base stations. This infrastructure is one-third of the total investment we plan for 2003. Our total financial investment this year will be 60 million euro — and 90 million euro by the end of 2004.
Q: Monopoly-weary Macedonians have eagerly awaited Cosmofon’s arrival. Yet local media quoted you last week as saying, “we’re not interested in a price war.” Were they perhaps too optimistic?
A: A war entails great danger for both combatants. Plus, sometimes unfortunate things happen to bystanders — in this case, the customers. For our long-term goals, it is better to foster competition.
In one of my previous assignments, I recall one point where we were heading towards owning 75 percent of the market. I had the stunning experience of hearing my CEO say, “gentlemen, give them room.”
There must be competition. It improves the overall market. It challenges and enhances your performance, and that of your competitor as well.
Q: Why did Cosmofon’s launch take so long? The general public has perceived MobiMak as deliberately stonewalling so as to drag out its monopoly.
A: What blocked the deal? First of all, there was great initial dispute about the validity of the transaction. Then, we had poor governmental support. The investor (OTE) was very careful in committing investment into the country, until the point came when we felt that no further legal declarations could stop us. The right time came last December. When the shareholders decided it was safe, they sent me here. My mandate was to get things done in the least amount of time.
Major disputes centered on regulatory and commercial issues with interconnection, but these were resolved in January. And here I have to praise MATAV (the Hungarian telecom company)for their good cooperation in the negotiations.
Q: You opened to customers on 14 June- less than two weeks ago. Are you satisfied with this initial period? Do you have any figures yet?
A: I cannot discuss numbers here; you understand that it is slightly delicate at this time.
However, we will soon be putting statistics down on paper. What I can tell you is that business has been running 500 percent above my target.
Q: 500 percent! To what do you attribute this fortunate error?
A: We obviously underestimated the market. The main reason for our success, I believe, is our better prices.
Our estimate is that our prices are 30-35 percent lower, in terms of total cost — that is, after you factor in monthly fee, services, and personal user patterns. Also, we’ve introduced per-second billing. The competition offers per-twenty second billing (for postpaid accounts) and per-ten second billing (for prepaid accounts). Also, note our tariff structure. We wanted to suit the individual consumer’s user patterns. Our post-pay tariff is stepped — the more you use, the less you pay.
Cosmofon also believes in unified rates. The competition, on the other hand, charges different rates for calls made to landlines and mobiles. We promote the philosophy that communication is a need. People should feel free to use the service whenever they like.
Another reason is the accumulated disappointment of the people at the monopolistic behavior of our competition. Finally, there is the factor of novelty — everyone wants to try something new.
Q: Yet novelty is a mixed blessing. Are you afraid public interest may taper off eventually?
A: Our plan now is to revise our original business plan and align it with signals we’re receiving from the market. We will continue to offer the same rates — certainly, we won’t raise them. We are looking ahead to a period of very significant growth.
Q: Dan Doncev, former CEO of Macedonian Telecommunications, alleged last year that high consumer prices in Macedonia were partially a result of price-gouging by the owners (Hungary’s MATAV, and ultimately, Deutsche Telekom). The argument went that, because of a Europe-wide industry recession, the owners were trying to milk Macedonia for all it was worth, to make up for losses in other markets. Could this conceivably happen with OTE and Cosmofon?
A: We have never operated under such a policy. Our philosophy is that the subsidiary in each country should pay into the general budget the revenues anticipated in the original busin
ess plan. Macedonians shouldn’t worry about price-gouging. In any case, OTE is doing very well, partly because of Cosmote’s great success. This is a company that joined the market 5 years after the first 2 Greek mobile operators, and 3 and a half years later, is leading the market with revenues in 2002 of 1.2 billion euro. Cosmote enjoys a 43 percent EBITA rate, among the three highest in Europe.
Q: Is there a date when you believe Cosmofon will achieve market parity?
A: Tactically, this goal never enters anyone’s business plan. We have a different strategy. Rather than try and take all of MobiMak’s customers, we’d like to expand the market. My main target is customers who don’t have any mobile service. We are marketing towards them.
Q: Cosmofon is now Macedonia’s second mobile operator. Is there potential for a third mobile operator?
A: There is sometimes talk of a third mobile operator in media analyses. It is my clear opinion based on the numbers that there is not room. In a country of only 2 million people, a third operator would simply not succeed.
Q: What part do you envision Cosmofon playing in OTE’s overall strategy?
A: What we are witnessing here in Macedonia is a part of OTE’s general Balkan investment strategy. We’ve had great success with Bulgaria, Macedonia and Albania, and we will strengthen our presence in Serbia. We are present in Romania’s Rom Telecom, which owns a GSM license. Romania is very significant because of market size. Although operations there have been in troubled waters for some time, OTE has demonstrated determination to remain, recently gaining a shareholder majority.
Regardless of that, we are very confident of overall regional success. And Cosmofon in Macedonia is a very important part of our greater Balkan strategy. Our operations here have started very positively, and we anticipate a lot of future success.
