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DOW JONES NEWSWIRES
INTERVIEW: Greek Telecoms Regulator Mulls Breakup Of OTE
The move, known as functional separation, would split OTE, Greece's incumbent telephone company, into two parts - one providing retail services, the other providing wholesale services. Considered by many in the industry a blunt-edged tool, functional separation was introduced by E.U. telecoms commissioner Viviane Redding this month as a way for national regulators to open up Europe's telecommunications sector faster. "I think we should start evaluating at the beginning of 2008 the tools that we have and how effective they are. But also observe the behavior of the incumbent," Hellenic Telecommunications and Post Commission President Nikitas Alexandridis told Dow Jones Newswires in an interview. "And during next year, we should figure out whether we should look into functional separation in more detail," he said. OTE, the one-time monopoly and somewhat iconic telephone company of Greece, has steadily seen its market share shrink since the country first liberalized its telecommunications sector in 2001. It controls slightly more than 70% of Greece's total telephone market for voice traffic, and expects that to fall to about 67% over the next two years. But Greece's telecom sector since liberalization has also evolved unevenly. On the one hand, Greece has enjoyed years of robust competition among three big mobile operators, which have been the major rivals to OTE in voice telephony. And OTE's mobile subsidiary Cosmote Mobile Telecommunications SA (COSMO.AT) - once the weakest of the three - has come from behind to claw back a narrow lead over Vodafone Greece and Wind Hellas, through competitive rates and slick marketing. But among fixed-line services, OTE still rules the roost. Until early this year, it controlled close to 100% of Greece's telephone lines and the competition was split among more than a dozen smaller, financially weaker operators. So despite nominally adhering to E.U. free market directives, Greece was one of Europe's laggards. Not only was it one of the last to open up its fixed-line telecoms network to rivals - the so-called unbundling of local loop - but it was also years behind in adopting broadband. A year ago, just 20,000 telephone lines - out of about 6 million overall in Greece - were available to OTE's rivals. And the number of broadband lines was around 400,000. That is now starting to change and both the number of unbundled loops and broadband lines have soared, particularly since earlier this year when the Telecoms Commission forced OTE to open up its network to rivals. "We are only at the beginning of things," said Alexandridis. "We are getting out of the last place in Europe where we were at. But that's not so significant, because I think we should be moving faster than the rate we are moving at." But the key to what comes next, what further measures the Commission may take to open the market, also depends on OTE, says Alexandridis. "If the mentality changes and the incumbent does not become an obstacle to the development of a healthy and competitive environment in the telecommunications sector, then some of the tools the regulator has may not need to be applied," he said. "If the incumbent becomes an obstacle...then some of the heavier tools need to be considered. The heavier, not necessarily the heaviest, is functional separation." Since his appointment in August 2005, OTE and the Commission have been at loggerheads. Alexandridis, a computer engineer and academic by training who spent much of his career in the U.S., says Greece has lost valuable time in opening up its telecoms market by mollycoddling OTE for too long and being slow in adopting E.U. regulations to open the market. In his two years in office, he has imposed several dozen judgments and fines on OTE, including a record EUR20 million fine against the company for abusing its dominant position to squeeze out rivals in the broadband market. OTE has fought back, challenging almost every one of the Commission's decisions in court and winning a few of them. On top of that, there have been frequent public barbs by OTE Chairman and CEO Panagis Vourloumis against the Commission. And both publicly and privately, OTE officials frequently challenge the authority of both the Commission and Alexandridis himself, questioning not only his legal powers but even his personal credentials. OTE has a fair amount of popular sentiment on its side. Despite complaining about service from the company, many Greeks view OTE as a national champion of sorts - the largest industrial employer in the country, a key component of Greece's national defense, and a one-time symbol of the country's economic development. Indeed, public opinion polls show that most Greeks don't favor the further privatization of the company - now 28%- owned by the Greek state. And politicians, the unions and even the press are implicitly critical of the further dismantling of OTE's dominant position. "I sometimes have the feeling that I am going against the national sentiment," said Alexandridis. "I sometimes think I am going against the political sentiment too. And I think OTE plays that to its advantage." But if anything, what Greece needs is even faster market opening and a bold vision for telecommunications, Alexandridis says. In his view, that would include a government-backed plan to build a new fiber-optic network to each home, and learning from the technological leaps being made in developing markets of Eastern Europe and Asia. "If we go at the pace that OTE wants, that leapfrogging in technology will never happen. If we wait that long we will be dead, just look at the progress made by the former Eastern bloc countries," he said. "I think a technology-based company like OTE should look to move forward technologically," Alexandridis said. "Looking back to maintain the status quo is not to the advantage of the incumbent, and of course, not to the advantage of the whole country." Commission Web site: http://www.eett.gr -By Alkman Granitsas, Dow Jones Newswires; +30 210 331 2881;
alkman.granitsas@dowjones.com
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