Vodatel was a great opportunity and we seized it

The strategic goal of Metronet is to become the leading provider of broadband services. With existing infrastructure, all successes in the Croatian market, and all its resources, Vodatel fits perfectly into Metronet’s strategy.

Interviewed by: Miodrag Šajatović
[email protected]

Metronet telecommunications company announced a few days ago the acquisition of Vodatel. The value of this transaction amounts to 80 million kuna. For Metronet, a provider that currently holds 17 percent of the market, this is the second acquisition this year.

• The acquisition of Vodatel, your latest business move, has resonated quite a bit in the public. After the Dubrovnik Chaos net, you have acquired, within just a few months, another company. Is this just the beginning or the end of Metronet’s acquisitions?
– If I must choose from the options provided, I would certainly say – the beginning. We have confirmed our strong orientation towards expansion and development with the two acquisitions you mentioned. Development is primarily a hallmark of our business, and it is precisely development that is the focus of every Metronet business activity. Acquisitions are just one of the tools in achieving our strategic goal. Investing in our own network and infrastructure is our main modus operandi, but at the same time, every important market participant, especially in such a dynamic industry as telecommunications, must feel the market pulse and follow all the opportunities that the market offers. The acquisitions of Chaos and Vodatel were excellent opportunities, and Metronet seized them.

• When do you expect a return on these investments?
– Metronet is still in the phase of investing in the most modern network in Croatia. Investments encompass technologies and service development in our telecom market, and accordingly, the horizon for the return on these investments is extended. When we embark on such significant investments, we expect a return in two to three years.

• What were the key reasons for entering the acquisition of Vodatel?
– The strategic goal of Metronet is to become the leading provider of broadband services. Vodatel, with its existing infrastructure, all its successes in the Croatian market, and all its resources, fits perfectly into Metronet’s strategy. We recognized Vodatel as a market player that has successfully fought for a leading position in providing integrated Triple play services to residential users, with a developed IP TV solution system, and as such represents an extremely complementary part of Metronet’s future business orientation, which began in May 2007 with the launch of services for residential users and small and medium-sized enterprises.

• What does this acquisition bring to Metronet, to Vodatel, and to users?
– The acquisition has brought significant benefits to both us and Vodatel, but it is the users who will greatly benefit from this acquisition. I must emphasize the faster delivery of services to users. Service quality, speed, favorable pricing, these are all benefits that this acquisition brings to Croatian citizens and business users.

• How will the new consolidated company look: in numbers and in strategy?
– By the end of 2007, the consolidated revenue will amount to around 150 million kuna. Together, we will have more than 1,500 large and medium-sized companies on our network using integrated voice, data services, internet, and IT solutions, as well as services of our company. The acquisition of Vodatel is a continuation of the strategy in developing the highest quality and innovative services for residential users, which will include voice messages, internet, television, and upon request, other additional services, all on one bill issued by Metronet.

• Since the beginnings of the liberalization of the telecommunications market, experts have diagnosed that consumer appetite is too small for a double-digit number of active operators. How do you see the further development of the market, and do you believe it will continue to consolidate?
– Yes, we are all already witnessing this trend. Acquisitions should be viewed from the perspective of their contribution to the market. The diagnosis that interests both companies and users and regulatory bodies is – does a particular acquisition strengthen the market or weaken it? Our case is clear – the acquisition meant the creation of a stronger market player with a quality offer, and Metronet and Vodatel have proven themselves in this regard and strengthen market competition. Consolidation was inevitable; I have personally been a good forecaster and have often spoken about it publicly. One of the most reliable indicators, without even entering into the strategy of each individual company and its vision, is the ratio of supply and demand and the size of the market in which you operate. Understanding the habits of the same market in which you operate is also an essential characteristic of any company that wants to grow. Metronet has proven to be an excellent example; we scan the market in every segment, and we have made every business move at the right time.

• Speaking of the ratio of supply and demand you mentioned, do you really believe that there is already a sufficiently large user base in Croatia that guarantees operators the profitability of providing Triple play and other advanced technologies?
– You are aware of how dynamic the telecommunications market is, and you use many services that are available to you today. Communication is the essence of existence, and operators today have an increasingly demanding task to meet citizens’ needs and offer them communication tools that absolutely satisfy their needs. Although many thought that demand in Croatia in the third millennium was much lower than the current supply, I am optimistic because I know that demand is growing, and users are becoming more informed and demanding. Speed, quality, price, availability, ease of use of the service, multifunctionality are just some of the criteria that users follow today when considering the offer. Integrated solutions are a logical step – both internet and TV and phone in one are the present, but also a good foundation for the development of all future services that will enable Croatian users the highest quality communication.

• Metronet quietly began laying fiber optics in 2005, and as far as we know, you mainly have your own infrastructure. However, in many areas, you are entering the territory of already laid cables whose ownership many claim. How does Metronet see the ownership solution for DTK infrastructure?
– Since we started operating, we have been active participants in the market. We do not consider mere participation a significant obligation, and we are too responsible for a passive role. Proactivity is woven into all the tenets of Metronet’s business. From the beginning of our work, we actively contact both the responsible ministry and the regulator. We have made numerous proposals to resolve the situation in which operators have found themselves due to unresolved ownership relations over key infrastructure. However, we are aware that everyone should do precisely what they are most competent for; decisions about ownership of DTK infrastructure should be made by the authorities for whom this is indeed a primary task in their job description.

• What services does Metronet currently provide, and where do you see the most opportunities for development?
– The pages of Lider that you dedicated to our conversation would not be enough if I started describing the qualities and advantages of each of our services. Therefore, I will just say that we offer voice, internet, and data services based on broadband in all segments – from large business users to citizens. Metronet is a unique operator in many ways, and we are proud of another significant achievement – we are the only operator that offers services to citizens that, until the introduction of our offer this spring, were a privilege of large business users. Our significant step is the expansion of the offer to the residential market. Metronet intends to complement the existing MetroBroadband service for households and small business users, which is currently provided via ADSL2+ technology, with fiber optic connections. Metronet’s goal is to cover 100,000 households by the end of 2007 and 300,000 households by the end of 2008, in Zagreb, Split, Rijeka, and Osijek. These are figures for fiber optic connections (FTTH), while by the end of the year, we will cover more than half a million users with ADSL2+ technology.

• Europe sees broadband as the key to economic development, and in broadband coverage, Croatia lags behind Europe. How much does Metronet want to contribute to catching up with Europe, and how much does it actually contribute?
– Without modesty, Metronet contributes significantly to the development of broadband in Croatia, and ultimately, we have introduced business broadband to Croatia. Broadband is the key word in today’s education and business, and Metronet will continue to do its best to show both citizens and companies all the advantages of communication over broadband internet and thus become competitive with developed Europe. Our significant contribution is also Intelligent Cities, a project in which we invest a lot of knowledge and energy, and we are extremely pleased. Varaždin is an excellent example that vividly illustrates everything that broadband offers today and how much it contributes to its service consumers. Metronet is diligently working on networking all key points in Varaždin; we have connected most city companies and public facilities, and there is much planned for that city and its residents.
• What are your relationships with competitors and the regulator?
– They have always been correct, and as far as Metronet is concerned, they will remain so.

• What are your business plans for 2008? What market share do you plan to occupy next year, and what are your medium-term and long-term plans?
– In the current year, we have already exceeded the business plan by 15 percent. In 2008, we expect 330 million kuna in consolidated revenue without Vodatel. In the medium term, we expect a 10 percent market share in the Croatian fixed telecom market and a solid number two position in every segment in which we are present. Given that Metronet is still a young company, despite the significant success it has achieved, I would not yet speak about long-term goals.

• Are you considering expanding the business beyond the borders of Croatia?
– We want to expand wherever there is room, and that includes the region. However, it is still a bit early to talk about it. Still, I can say we are working, working…

• How do you view the upcoming IPO of HT? Will that one day be a scenario for Metronet?
– Metronet has always focused on its own business and implementing its own decisions, and it has welcomed all events that contributed to the development of the market, regardless of who among the other operators was involved. An IPO is not currently an option for Metronet, but I emphasize that Metronet is already present in the Croatian capital market thanks to its successful bond listing.

• Together with Vipnet, you won the tender for telecommunications services for Zagrebački holding, but HT disrupted that tender through diversion. Who suffers the most damage in this, and will you apply for the newly announced tender?
– Who suffers the most damage is not in question – it is the holding itself. It is a huge mechanism, an increasingly modern organization that has, let us be aware, had to pay significantly higher services during all these months lost in repeating the tender. And that is all I will say on this topic. I am aware that the Croatian market, despite the significant growth it is achieving, still knows how to suffer from some childhood diseases, especially in the group of public tenders.

• How is the liberalization of the market progressing? Is HT still obstructing it? How long does it take to realize a colocation? How many colocations do you currently have?
– The liberalization of the market has significantly progressed in the last year, but according to Metronet’s opinion, it is still not enough for challengers and fast young telecoms to have enough room for growth. The national monopolist still uses all permissible and impermissible means to prevent accelerated growth… Each colocation is a story in itself. Metronet has successfully realized 60 colocations so far, and by the end of the year, it will certainly exceed the number 100.

• Who are your key clients? What have you taken from HT?
– First of all, I must note that every client is important to Metronet, without any false modesty and the politeness that corporate language demands. We do not divide clients by importance, and we approach each one according to the same, logical key – we listen to all their needs and adapt our offer to them. I am proud that CRM and retention management are an essential part of our business, and clients appreciate it. Among large clients, in terms of the number of locations and connections, on the Metronet network are, among others, Mercator, DHL, Merkur insurance, Školska knjiga, Investitori Kvarner, Bauhaus….