While globally, the telecommunications industry is hurting, Cosmote, the half state-owned Hellenic Telecommunications Companys (OTE) cellular subsidiary, only has good news. Net profits in 2001 went up 201.3%. While clinching the first-place slot in the domestic market in 2001 helped, another key factor was investing in Albania's nascent mobile phone market.

Albanian success story
The Financial Times Top 500 company, which started functioning in 1998, took a chance when Albanian Mobile Communications (AMC, founded in 1996) was up for sale in June 2000. Cosmote became the biggest private investor ever in Albania, purchasing 85% of the company for 96 million euros. It set to install 200 stations throughout the mountainous land.

In a country where only 7% of the population have land-line phones, cellular phone technology proved attractive. AMC net profits grew 37% in 2001. Today Cosmote counts 305,000 customers in Albania, the majority of them prepaid customers (using AMC's Albakarta cards). With Albanian cell phone owners speaking an average of 300 minutes per month (as opposed to Greeks' 97 minutes per month), the enterprise proved very profitable. Today 10% of the 3-million-inhabitant country are using cell phones, as opposed to 1% in 2000.

Cosmote's investments on AMC in 2001 totalled between 45 and 51 million euros. If the Albanian customers are small in number, compared to Cosmote's 3.08 million Greek clients, AMC contributed 9.6% of Cosmote's consolidated revenues and 15% of the company's EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation).

OTE's Balkan investments
The AMC move was just one example of OTE's effort to expand beyond Greece's 10.7 million population (7.6 million of which have cell phones). The potential market of 120 million in the broader Balkans (including Turkey ) has its appeal. Today the 51% state-owned parent company of Cosmote (owning in turn 59% of Cosmote) counts 16.5 million clients throughout the Balkan region.

Over the past decade, OTE became the main regional investor, profiting from the decline of state monopolies and need for new telecommunications technology. In 1997, OTE bought 20% of Serbia's Telecom Srbja (TS). The next year, it purchased 35% of Romania's Rom Telecom and 90% of Armenia's ArmenTel. OTE has made smaller investments in Jordan, Yemen, Lithuania and Georgia. It also is part of a Ukrainian joint venture.

With the increased importance of cellular telephony, OTE's Balkan companies have growing cellular divisions. In 2000 OTE purchased Bulgaria's second cellular phone license (forming Cosmo Bulgaria Mobile), naming its cell subsidiary GloBul. That company signed on 130,000 customers between September and December 2001.

The path hasn't been easy. OTE's Rom Telecom cellular division, CosmoRom, is experiencing difficulties. OTE was saddled with debts such as a 56 million euros payment to Rom Telecom recently, due to competition from France Telecom and Vodafone. In November 2001, OTE also won a tender for The Former Yugoslav Republic of Macedonia's (FYROM) second mobile phone network. But OTE lost out to Hungarian company Matav the previous year, in attempting to buy a large stake in FYROM's state monopoly phone company Maktel.

These OTE endeavours and the Cosmote AMC investment total 1.7 billion euros to date, but OTE estimates that profits from the Balkan investments will reach 1.13 billion euros by 2003. Meanwhile there have been rumours over the past year that Cosmote may invest in FYROM or collaborate with Turkey's TurkCell.

Beyond the Balkans
Despite the lure of emerging Balkan markets (where incomes are between a third and a twelfth of Greeks ones), OTE subsidiary Cosmote may be ready to invest in more mature markets.

In a January press conference, Cosmote managing director Evagelos Martigopoulos noted that the company's success in Albania has encouraged it to look for more investment abroad. He noted that Cosmote will invest 2.9 million euros by 2005 in value-added services (building third generation networks for the 2004 Olympics ) and foreign investments. When asked if these investments would be in the Balkans, he replied that Cosmote isn't limited to neighbours alone, hinting at an interest in Central European countries.

When OTE's new CEO, Lefteris Antonakopoulos, took his seat on March 13, he reaffirmed OTE's interest in moving beyond the Balkans. "OTE is not going only there," he said.

With its expansion plans, Cosmote, a Grand National Sponsor for the 2004 Athens Olympic games, continues to be a valuable stock. It is on both the Athens and the London stock markets. It was among the most successful Greek stocks in 2001, though some instability has been introduced due to uncertainty over OTE's publicized intention to buy back Norwegian company Telenor's 18% share in profitable Cosmote.