August 19 (SeeNews) - Macedonian wireless carrier Vip Operator, a unit of Telekom Austria, expects to maintain a stable growth of its revenue and market share in 2009 as it targets a place among the top two mobile telcos in the Balkan country in the long run, its CEO Nikola Ljusev told SeeNews in a written interview.
Vip Operator is the third largest mobile telecommunications company by market share in the country of two million people, behind Magyar Telekom’s local unit, T-Mobile, and Telekom Slovenije-owned Cosmofon.
The company posted a negative EBITDA (earning before interest, tax, depreciation and amortisation) of 4.3 million euro ($6.1 million) in the first quarter of 2009, down from 6.0 million euro a year earlier. Vip Operator’s revenues more than doubled on the year to 3.9 million euro in the first quarter of 2009 compared to 1.8 million euro a year earlier.
Vip Operator had 213,000 subscribers at the end of March, compared to 163,300 a year earlier. Its market share was 9.3% at end of the first quarter, up from 8.1% a year earlier.
Here is what Nikola Ljusev told SeeNews:
Q: What has been the impact of the financial and economic crisis on the Macedonian mobile telecommunications market?
A: It is noticeable even in the telecommunications market in Macedonia, where the average cost per user is relatively small (less than 10 euro per month), there has been a strong steering towards cost optimisation. Speaking about our operations, from the very beginning we started with a consistent brand positioning in the area of price and value leadership, so we quite successfully reversed the downward crisis spiral to a strong motivation for valuable future prospects. It is the cost steering incentive that triggered some loyal customers of our competitors to leave their former providers and change them for the first time in their life. As a result of this, even in a period of economic downturn we are improving consistently our financial and operating performance, every quarter being better than the previous one.
Q: What are your projections for VIP’s financial performance in 2009 compared to last year?
A: We expect and believe that we will keep the stable growth in revenue and market share, meeting the expectations of our shareholders. The growth is always connected not only to operational excellence and right propositions on the market, but a lot of externalities that have their influence as well. According to many analysts, the national economy is facing the bottom of the crisis and I really hope that sooner rather than later we will be able to catch a good wind for the upside. If we speak about financial performance targets in comparison to the last year, the most relevant key performance indicators will be the significant increase of revenues and reduction of operating losses.
Q: How is the company performing on the pre-paid and the post-paid segments? Which of the two is setting the pace of growth?
A: What we can officially say in this respect is that we are progressing well in the pre-paid segment, which is very important for building a community and growing in terms of market share, as the Macedonian telecommunications market is basically known as a pre-paid oriented one. Nevertheless, our focus is pretty dominant on the post-paid segment, too – both from revenue potential and business predictability perspectives. We are more than pleased with the results in the post-paid segment, it appears that in the last one year we managed to find the right blend of irresistible propositions: best price of 0 MKD/min on-net for lifetime, nice portfolio of handsets, good service quality, plus exclusive service offerings like BlackBerry and Virtual Private Networks for corporate customers.
Q: Does the company plan to enter the wireless Internet market segment?
A: Well, we are already there from the very moment of our commercial start. It didn’t take years to deploy GPRS/EDGE proposition on our side, as it was the case with the mobile incumbents in Macedonia. The technology that we have is currently satisfying the needs of our customers. We believe that there is certain potential in the mobile broadband data business and we are keen to exploit it as much as it makes business sense.
The next step, from a broadband infrastructure perspective – and there are few straight forward technology options to go for - has to be justified by finding a proper business model that will bring both customers and operators in a win-win situation. The operators need to find a sustainable value before jumping to yet another big investment cycle and avoid becoming a “dump bit-pipe”.
Q: How is the handset side of the business performing? How does the rate at which mobile operators in Macedonia subsidise handset purchases compare to the rest of the region?
A: The customers here in Macedonia are eager to own and show off with modern, super fancy terminals. Some psychology experts are saying that modern mobile phone possession is perceived as “affordable status symbol substitute” when it is not financially possible to have a luxurious car, a big house, etc. While it is normal in most countries to subsidize the terminal for post-paid customers depending on contract binding period and tariff plan, we also saw in Macedonia subsidizing on pre-paid, which is bit of extreme from a business perspective. In respect to subsidy levels in Macedonia in comparison to the rest of the region, I think that differences are coming as a result of internal market dynamics, competition legacies and market forces.
Q: What are the company’s subscriber base/market share targets?
A: Well, speaking of the long-term perspective, it is our vision to become one of the top two mobile operators in the country. So, we are in a mission to consistently and sustainably grow in terms of market share and revenue.
Q: What is the company’s advertising budget? Is it betting on TV, print or online advertising?
A: Of course, as a mobile operator we are among big media spenders in the country. We are working hard on finding the smart mix between traditional channels for marketing communications and new, alternative ones which might be even more cost efficient. TV is still the most powerful media in Macedonia, but we are also using other channels of communication: radio, print and Internet advertizing.
Q: What is the company lining up as part of its alliance with Vodafone?
A: We have been the exclusive partner of Vodafone in Macedonia for more than a year. The partnership helped us a lot to exploit synergies with Vodafone on different levels: bringing world-renowned products and services from Vodafone's portfolio like BlackBerry on the Macedonian market, extensively using the benefits of partnering with Vodafone on the purchasing side, especially with exclusive Vodafone-branded handsets, and last but not least, the partnership helped us a lot in expanding roaming footprint with the biggest worldwide network.
Q: What has been the market impact, if any, of MNP in Macedonia?
A: I have always been in disagreement with people who are preaching disbelief in the portability of numbers. Irrespective of the figures of ported customers - whether they look big or small - we should not put the label of success based on short-term uptake facts. The inherent value of MNP lies in the powerful concept of breaking down the legacy between the number that used to belong solely to the operator, and the customer who is investing in building emotional value to this number throughout years of usage and encounters.
Regarding our initial results in respect to MNP, Vip is proud to be a leader not only in implementation of mobile number portability service but also in the service provided to the customers in Macedonia. We acknowledge and praise the brave decision of the Agency for Electronic Communications that decided last year to put a firm deadline on the ongoing saga in the implementation process of MNP. The initial results in only one year time are satisfactory, we are happy that mobile customers are selecting predominantly us as an operator and that we have the biggest number of ported-in customers in our network.
Q: How far is the Macedonian mobile market from reaching the saturation point and is there room for a fourth operator?
A: Macedonia is a very small market of only 2 million people. In many businesses, but especially the ones with relatively high share of fixed costs, the economy of scale is one of the predominant factors for success. The penetration rate of the mobile telephony is already above 115%, according to the official figures released by the operators in their annual reports. In the current circumstances and distribution of market shares/revenues, the potential for having more than three mobile operators is literally zero. Much bigger markets than Macedonia have provided no hard evidence for the sustainability of more mobile players on the market.
Q: The company’s competitors have each been awarded 3G licences. How will you match their next-generation offerings?
A: We don’t want to play the game of the others. On the contrary, we will compete on our ground and exploit our strengths, deciding when to hit, how to do this and whom we'll target. Those, who are more closely following the telecoms market in Macedonia, have recognized that the most out-of-the-box ideas have been coming from Vip and this will be the case in the future as well.