M&A activity set to change the landscape of SE Europe; Central Asia to follow?

The emerging markets focus of this blog has led me, in the main, to round up and review developments in low teledensity countries of Africa and Asia, with only occasional detours into somewhat more mature markets in Eastern Europe, Central Asia, Latin America and elsewhere.

This time, however, being here in Vienna (dodging the rain and catching up on paperwork right now) has inspired me to look a bit closer to (my) home.

According to a recent TeleGeography article, Greek telecoms group Cosmote has reportedly reached an agreement with Oger Telecom regarding the takeover of Romanian mobile operator Zapp. Cosmote's existing Romanian operation occupies the third position on the market with 22.55% of the 28.55 million subs, according to the World Cellular Information Service. Zapp is a much less significant operation, with 0.96% of subs - and this is down from 1.82% a year ago.

What, then, is the point of this prospective acquisition? Gaining a 3G proposition seems to be the answer - Cosmote Romania is, as the TeleGeography article notes, the only mobile operator in the country without a UMTS concession.

For a long time, Zapp was the Romanian market's lone CDMA operator. Although Zapp had already got into third generation service provision via the deployment of a existing CDMA EV-DO network, the company decided last year to use UMTS/HSDPA technology for its 2100 Mhz network as opposed to CDMA2000. I daresay had Zapp not gone down this route, the company would be a less attractive acquisition target for Cosmote.

Zapp is an extremely small part of the Oger Telecom portfolio, which includes South African cellco Cell C and Turk Telekom, Turkey's dominant wireline operator which has, according to another recent TeleGeography story, formed a joint working group with its parent company to prepare an offer for the Kyrgyz state-owned telecoms operator Kyrgyztelecom. That article states that the privatisation of Kyrgyztelecom "has been on the Government’s agenda since 1998, although little progress has been made" and that "in July 2008 Turk Telekom declared that it was considering bidding for the 77.84% stake in the telco, but two months later was barred from participating after it failed to pay a required security deposit within the deadline." According to this story, these difficulties have not deterred the Turkish operator from coming back for another attempt.

While keen to improve its proposition in Romania, Cosmote might appear to be in the midst of evaluating how much of the rest of its southeastern Europe footprint it would like to retain. As well in Romania, currently the group has operations in Albania and Bulgaria. Until recently, the Cosmote footprint also extended to Macedonia, a market from which the Greek group exited via the sale of MNO Cosmofon to Telekom Slovenije. On 31st March telecoms.com reported that the Slovenian incumbent had beaten Turkcell to the punch with a successful EUR 190m bid for the Macedonian cellco. That article notes that as well as operating a 3G-HSDPA network, Cosmofon has also acquired six regional WiMAX licenses and launched a nationwide WiMAX network.

Were Cosmote to consider retreating further from the Balkans, one party unlikely to approve would be Deutsche Telekom. A recent MarketWatch article indicates that the giant German telco's purchase of a 20% stake in Cosmote's parent company OTE is motivated by a desire to offset increasing competition from cable and Internet operators on DT's home turf - specifically by expanding its footprint in high-growth markets such as Bulgaria, Romania and Albania.

M&A activity set to change the landscape of SE Europe; Central Asia to follow?