Greece Telecommunications Report Q3 2007

In the first three months of 2007, the number of Greek mobile subscribers grew by 4% to reach 14.647mn. With a mobile penetration rate of over 127%, Greece has one of the highest mobile penetration rates in Europe. Despite this, the country continues to display strong subscriber growth rates and there is no immediate evidence of any significant slowdown. Steady growth is expected to continue throughout 2007, with a 7.45% increase in subscribers being predicted for 2007 as a whole. We anticipate that Greek mobile penetration will reach 135% by the end of the year. Nevertheless, and as noted on previous occasions, the reported operator figures contain a significant number of inactive subscribers. Looking ahead, we anticipate that the operators may begin discounting inactive accounts from their figures, and this could lead to significant adjustments to our forecast. Meanwhile, prepaid customers have continued to grow at a faster pace than post-paid/contract subscribers, and this phenomenon appears to be hitting at ARPU levels. Despite this, there are early signs that the growth of 3G and mobile data services is starting to improve post-paid ARPU levels, at least in the case of Vodafone.

One of the most significant announcements from the Greek telecoms sector in the past few months was the relaunch of GSM network operator TIM Hellas under the WIND Hellas brand in June 2007. The move followed the earlier acquisition of TIM Hellas - together with its wholly owned subsidiary QTelecom - in February 2007, by Weather Investments, a holding vehicle for the telecoms assets of Egyptian telecoms tycoon Naguib Sawiris. Weather Investments paid US$3.4bn to acquire TIM Hellas and Q-Telecom from private equity firms Apax Partners and Texas Pacific. Also, at the end of June 2007, the Greek government announced that it had completed the placement of a 10.7% stake in national incumbent operator OTE, netting some EUR1.1bn from the sale. The sale of the 10.7% stake in OTE to institutional investors attracted strong investor interest from abroad and resulted in institutional investors controlling 69.7% of OTE's shares. The government, which continues to own 20% of the Greek incumbent, had previously explored the possibility of selling OTE to a strategic international investor.

However, it is thought that one of the factors that deterred potential investors was the government's determination to retain managerial control over OTE.

Greece continues to sit near the top of our Business Environment Rankings for Central and Eastern Europe, despite having been recently displaced from its first place position by the Czech Republic. The country has retained its previous long-term economic risk score, amidst signs of an increasingly healthy economic performance. However, the emergence of a corruption scandal connected with the issuance of government bonds has tarnished the government's reputation and may jeopardise its re-election chances in September 2007. In the telecoms market, the declining fixed-line market and high mobile penetration are counterbalanced by low broadband and 3G penetration rates, indicating room for further growth in the market overall.