INTERVIEW: one.Vip takes top spot in Macedonia’s mobile market after merger

INTERVIEW: one.Vip takes top spot in Macedonia’s mobile market after merger
one.Vip was formed through the merger of Telekom Austria and Telekom Slovenije’s units in Macedonia.
By Valentina Dimitrievska in Skopje March 29, 2016

Macedonian telecommunications company one.Vip, formed through the merger of Telekom Austria and Telekom Slovenije’s units in the Balkan country, has taken the leading position in the mobile market in terms of the number of users. The newly formed company’s executive director, Nikola Ljusev, forecasts more consolidation for Europe’s telecom sector.

Telekom Austria’s Vip and Telekom Slovenije’s ONE merged in October last year. The newly created company is 55% owned by Telekom Austria, which has management control over one.Vip, while Telekom Slovenije owns 45% with call and put options for the exit from the joint venture within three years.

Previously the market leader in the segment was T-Mobile Macedonia, which was merged with its parent company Makedonski Telekom, a unit of Magyar Telekom (part of Deutsche Telekom Group), in July 2015 with the aim of optimising operations.

one.Vip’s mobile customer base totals 1.163mn, and together with its television and internet provider blizoo it has nearly 145,000 users of fixed lines, Ljusev says. blizoo was acquired by Telekom Austria in 2014.

According to Telekom Austria, the number of mobile subscribers jumped 87% year on year (y/y) in the fourth quarter of 2015, thanks to the merger of Vip and ONE. one.Vip's mobile market share was 53.7% at the end of 2015. “It’s true that we have a leading position in terms of number of customers of mobile communication services, and we will work hard to maintain that lead in the mobile market, but we are also committed to expanding our share in the fixed line segment, both in terms of the number of customers and revenues,” Ljusev tells bne IntelliNews in an interview.

Ljusev highlights that there has been a global trend of consolidation among telecom operators over the last decade, as companies aim to improve efficiency and productivity, increase profitability, and enable bigger investments in new networks and technologies.

According to Ljusev, it is apparent that the markets of Asia and the US have a significantly lower number of operators than Europe, and achieve continuously better results. “In the coming period, it is certain that Europe will move in the direction of intensive consolidation that will result in stronger and more sustainable operations and will increase the investment capacities of companies with the objective of coping with market challenges,” Ljusev tells bne IntelliNews.

He stresses that Macedonia is no exception to this trend, especially considering that the market is small with a population of just 2mn. “When we were analysing the market years ago to see how the telecommunication industry in Macedonia would develop, we noted several worrying trends: the apparent decline in revenues of all operators, the market power concentrated in one dominant operator and, additionally, the increased regulation of wholesale prices, which put further pressure on retail prices and revenues in general, threatening the sustainability of smaller operators and their capacity to invest,” Ljusev explains. “For these reasons, the owners of ONE and Vip operator decided to merge their subsidiaries in Macedonia.”

Cable operator blizoo will also be merged with one.Vip, with the process expected to end during the second quarter of 2016, according to Ljusev.

Rebranding takes time

Concerning the rebranding of the new company, Ljusev stresses that it will take some time for full commercial integration and consolidation of the business processes of both companies to be completed, due to the complexity of the integration process.

ONE entered the market after Telekom Slovenije bought the Macedonian unit of Greece’s Cosmote, Cosmofon, in 2009. Cosmofon launched its operations back in 2003. Vip was founded in 2007 and was the last company to enter the market. Currently Vip and ONE have separate sales networks.

The company is working on building a new mobile network that will allow users the best coverage and quality of services, with a special focus placed on nationwide availability of 4G LTE services, Ljusev says. The project was launched at the end of 2015 and will last until the end of 2016. The first region where the project has been completed is north-eastern Macedonia in the cities of Kumanovo, Kriva Palanka and Kratovo. Currently, investments in the new network are ongoing in the Skopje region, which has the biggest concentration of customers and traffic.

Investments in the new mobile network will bring improved network coverage, better quality of voice and data services, high-speed data transmission and greater availability of services across Macedonia, Ljusev says.

According to Ljusev, unlike the mobile market, the fixed-line segment is fragmented, with significant concentration of market power on the side of the dominant operator, Makedonski Telekom. However, he says that one.Vip is also working on upgrading its fixed network, and “next year customers will have the most modern cable technology and best experience in fixed services from the best convergent operator in the country.” The new cable TV technology, HFC Docsis 3.0, will offer 2.5 times higher speeds or 300 Mbp/s and by the end of the year is expected to be available for around 85% of households, where blizoo has its own infrastructure.

“We are talking about millions of euros in investments in infrastructure projects and technologies that will bring numerous benefits to users,” Ljusev notes.

Room for competition

In terms of competition, Ljusev stresses that according to the Competition Protection Commission, one.Vip should host at least one virtual mobile operator.

The implementation of this commitment is ongoing and will be fulfilled by the middle of this year, Ljusev says. “Macedonia is an open market and any company that sees opportunity to create a good business here could be a new virtual operator in the market,” Ljusev says, adding that healthy and fair competition is the driving force behind all markets.

The first company that tried to enter Macedonia as a virtual mobile operator was a unit of Netherland-based World Teleconnect International Holding (WTI), but it never launched operations that were planned for 2011. Another virtual operator, Albaphone, was present on the market but only for a short time, from October 2012 to mid-2015. Albaphone had ethnic Albanians that live in Macedonia as its target group of clients, but halted operations due to debts. It used ONE’s network.

Asked about financial performance, Ljusev says he expects one.Vip to end the year with improved financial figures and to implement the integration programme that will allow the company to be even more competitive.

In 2015, the company’s after-tax loss decreased and revenues grew by almost 30% y/y as a result of the acquisition of blizoo and several smaller cable operators, and the merger of ONE and Vip operator in the last quarter. “The biggest challenge for the company is to be always one step ahead of others in anticipation of customer needs, delivering communications solutions that are easy to use with extraordinary user experience,”Ljusev says.

“Given that consumers are increasingly using data services, the company’s commitment is to provide the ultimate user experience in using broadband internet through our wireless network, with which we will partially overcome the handicap that we have with cable network infrastructure that is covering currently 40% of households in the country,” Ljusev explains.

“Our mission is to be always the first choice for customers to meet their communication needs,” Ljusev adds.