Greece - Accelerating Growth with 150% Penetration in Sight

The four Greek operators have now all reported Q4 2006 results. Although the 100% penetration landmark was reached as long ago as March 2004, the market shows no sign of slowing and, if anything, the rate of new connections is actually increasing. The chart below shows rising penetration measured on the right hand side and the quarter on quarter growth rate on the left.

It is tempting to conclude that there is a high degree of dual SIM ownership and consequently, inactivity contained within these numbers, but a cross-check with the trend in ARPU over the past couple of years suggests otherwise. At the current rate of growth, Greece will be 150% penetrated before the end of 2007.

Although the four networks don't measure average revenue in exactly the same way, each has used the same technique for the last eight quarters, so we can make like with like comparisons for each company. Cosmote has seen a marginal increase in ARPU, from €29.7 in Q4 05 to €29.9 in Q4 06. Admittedly, this is down on the Q4 04 figure of €31.1, but the decline is less than 5%, while the customer base has risen by over 20%. TIM has done even better, with overall ARPUs up from €26 in Q4 04 to €27.6 in Q4 06. The trend is probably flattered by the fact that this earlier result was somewhat depressed but, again, the improvement in revenues has occurred during a period when TIM added over 0.5m customers to its base. The latest ARPU figure from Vodafone shows a rather different picture, with the blended average down from €32.2 in Q4 04 to €27.6 in Q4 06, after €31.3 in Q4 05.

As we remarked in last week's issue of the Briefing, fourth quarter ARPUs are traditionally low at both Vodafone and TIM due to roaming effects, but this does not explain the decline at Vodafone, fourth-quarter on fourth-quarter. The drop in minutes of use at the operator does, perhaps, but what then explains this drop in usage?

The second chart shows the changes in market share over the same period. The earliest quarters were characterised by a fair degree of volatility, as Q-Telecom attempted to build up a position after its late launch and as TIM's share was eroded ahead of its sale to private equity. In more recent times, something approaching stability appears to be emerging. In part, this is due to the acquisition of Q-Telecom by TIM, which has effectively reduced the number of competitors to three - although Q-Telecom continues to trade under its own name. Quite how long this will last is anyone guess, as a further disruptive event has occurred - TIM has now been brought by Orascom and we suspect that it will not be satisfied with its current 28% aggregate share of the total.

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