Greek mobile market contracts by 12.5% in first half of 2010

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Greece suffered its second successive quarterly decline in mobile connections in 2Q10 as the country’s three main operators were forced to ramp-up deactivation of unregistered prepaid customers. According to the latest Wireless Intelligence data, total connections in Greece slumped to 18.2 million in the quarter, a decline of 12.5 percent (2.6 million connections) since the beginning of the year when the figure stood at 20.8 million. Our figures show that individual operators are currently losing around 400,000 – 500,000 prepaid users per quarter in 2010 as a result of removing the inactive connections.

The clean-up of the subscriber databases comes at a time when Greek operators are facing declining revenues due to regulatory pressures – notably mobile termination rate (MTR) cuts – and the effects of the austerity measures introduced by the government to address the country’s debt crisis. The situation has deteriorated to such an extent that Greece’s third-largest operator, WIND Hellas, is understood to be selling out to creditors. 

The prepaid deactivations were triggered by a new law introduced in November 2009 requiring all prepaid mobile SIMs to be registered with operators as a way of preventing anonymous mobile phone usage. All three operators promptly introduced schemes to allow their existing prepaid customers to register their details. Vodafone, for example, claims to have registered 95 percent of its prepaid users ahead of the 30 July 2010 deadline for compliance. However, the passing of this deadline means that further deactivations are expected to be seen in the current quarter (3Q10). Prior to the new law, Greek mobile penetration was calculated to be as high as 194 percent (4Q09), but it had already fallen to 170 percent by 2Q10, according to our figures. Multiple SIM ownership is also a factor deemed to be keeping Greek mobile penetration at an artificially high level. A recent Wireless Intelligence study found that multiple SIM ownership is widespread in Greece with an average 2.1 SIMs per single user (the highest level of multiple SIM ownership of any market in the study). 

Meanwhile, revenue at all three operators continues to fall. In Q2, market-leader Cosmote reported an annual service revenue decline of 11 percent, while Vodafone reported a decline of 14.5 percent in Greece at the end of its latest fiscal year (end-March). Both pointed to the effects of MTR cuts introduced in January 2009, which began the process of reducing MTRs by an average of 50 percent over the subsequent two-year period (to January 2011). MTRs are targeted to fall to EUR0.0495/min by this point, down from EUR0.10/min in October 2008.

The situation is considerably worse at debt-laden WIND Hellas, which this week reported a revenue decline of 28 percent alongside a 52 percent drop in EBITDA. The operator – which is owned by Orascom chairman Naguib Sawiris’ investment vehicle, Weather Investments – has been forced to step-up in its debt restructuring programme, a process likely to lead to creditors taking control of the firm. The company’s large debts and dwindling cash reserves are now seriously affecting operational performance, forcing it to reign in handset subsidies and even close some retail stores in favour of telesales and door-to-door sales channels. Its mobile customer base dropped to 4.2 million in the latest quarter from 5.2 million a year ago, as subscriber acquisition and retention initiatives were scaled back. According to our data, WIND’s customer base declined by 19 percent year-on-year in Q2, considerably greater losses than the 3.2 percent decline at Cosmote or the 9.3 percent drop at Vodafone. WIND’s ARPU is also lower than at its two larger rivals.

Despite a turbulent six months, operator market shares in Greece have remained relatively stable. However, market-leader Cosmote appears to have been the main beneficiary of the problems at WIND, increasing its share of the market to 47 percent in 2Q10 from 44 percent a year earlier. WIND dropped three percentage points to 23 percent over the same period, while Vodafone has remained unchanged at 30 percent.

Joss Gillet, Senior Analyst, Wireless Intelligence:

The sudden deterioration of WIND Hellas’ financial situation shows, once again, the importance of taking a pro-active approach to addressing new trends and market opportunities in the industry. But the fact that the operator is now switching its focus to enhancing its brand awareness, switching to an added-value and customer-centric approach, investing in advertising and, most importantly, investing in “network development to bridge the coverage gap” might come a little late in such a saturated market. Since 2008, we have been warning that even though a reduction in operating expenditure was inevitable, mobile operators still need to maintain capex at normal levels – around 13-14 percent of total revenues – since a squeeze in capex could put some players at risk in the medium- to long-term. Between 2008-09, WIND Hellas reduced its mobile capex by 3 percentage points to 10 percent – and to 6 percent in 1H10 – well below the industry average. Now left with negative quarterly free cash flows, the operator cannot face its short-term challenges and is looking to sell its operation as a strategic alternative. Overall, we believe that Greece is an over-inflated mobile market due to the high proportion of inactive prepaid users counted in operators’ quarterly performances. The recent subscriber database clean-ups forced by regulatory initiatives are expected to bring reported market data back in line with actual market reality.

Greece mobile connections, 2Q10
Source: Company data, Wireless Intelligence