There are pros and cons for consumers in the change of Germanos’ ownership.But the biggest losers could be TIM Hellas’ customers and its current UK-US owners
DESPITE recent bad publicity from some quarters of the Greek press, Cosmote’s acquisition of Germanos makes great business sense for the mobile giant and its parent OTE. The deal is set to shoot the lead player even further ahead of rivals.
Moreover, while the transfer of ownership will involve some initial change in consumer habits, it could ultimately open up the market further for retailers. The primary loser will be TIM Hellas, say analysts, while Vodafone will take its biggest knock in Romania.
Cosmote has paid 1.3 billion euros for Germanos, which it bought from founder Panos Germanos. The chain of stores is the largest Greek retail sales network in Europe for Technology Products and Services. It has 950 stores in seven countries (Greece, Poland, Romania, Bulgaria, Ukraine, Cyprus and FYROM), and has become firmly established as one of the strongest brand names in Europe. Cosmote has bought all but the Poland, Ukraine and Cypriot stores, which for the time being stay in the hands of Panos Germanos.
The chain’s new mobile owner will launch a public offer on the Athens Stock Exchange for the remaining Germanos shares (minorities) in two to three weeks.
Same music mix
The product mix at Germanos will stay the same - if anything it will grow - offering a wider range of electrical and computer goods, officials maintain. “We are the leader in the sector,” a Germanos source said, noting that selling music, for example, brings a lot of traffic into the store - such customers then, in turn, buy mobile phones. Germanos has also had a lot of success with other complementary products and services.
A deal with Kodak, printing photographs from mobile phones, digital cameras and the like, recently brought an extra one million customers to the stores. Other services such as saving valuable agenda and contacts from mobiles phones onto discs have also boosted shopper numbers. “We even offer numerous free services as a way to increase traffic,” the source said, linking all of this to huge potential for boosting the number of Cosmote subscribers. “We can expect the changeover to effect Cosmote’s market share rapidly,” the source said. It also offers the group a chance to diversify its sectors.
No more one-stop shopping?
The biggest change - especially for the consumer - is that Germanos will no longer be a “neutral” mobile phone retailer. Eventually, it will only offer subscriptions for Cosmote. In the past the retailer has been something of a “one-stop shop” for those wishing to be able to compare mobile products all under one roof. While own product stores from TIM and Vodafone have been around for some time, many customers still prefer the neutral retailer.
Asked how it could justly justify the deal to competition authorities and what this will mean for the customer, a source close to the deal defended the move. “One of the main things we argued to the competition authority was that there are numerous other neutral outlets,” they added. Indeed analysts also reckon that the switch could give other players a chance to offer a pre-Cosmote/Germaos-style service and “could really open up the market - creating more competition rather than less”. They cite Elektriki Athinon, Kotsovolos and Media Markt as three retailers already offering mobile subscriptions from all the players.
Out of Romania
The first operator to exit the Germanos group is Vodafone - but from Romania for now. The Athens News has learnt that Cosmote has signed an agreement with Vodafone for the latter to exit from Germanos as a distribution channel in Romania. Both sides have agreed to terminate the contract as from October 18. “This will give Cosmote a big advantage in Romania - Germanos had gained 500,000 subscribers for Vodafone there,” the source said. Asked how that would affect Vodafone - apart from restricting new subscribers - she replied: “Most of these are loyal to Germanos rather than Vodafone itself, so we expect to see a big switchover.” As for Vodafone’s distribution channel contract in Greece, she said this would be decided after the public launch, but in any case it expires next year and would not be renewed.
In Greece, Cosmote stands to gain over 340 exclusive outlets, whereas it only had 24 stores before. “The biggest loser is TIM Hellas,” one of the sources said. At a time when UK-US owners Apax and TPG Partners are looking to sell the player - some say for as much as 4 billion euros (far more than double what it paid) - it will lose the channel that has brought in 60 percent of its clientele. An awareness of this could even bring down the sale price from such an inflated sum. The Germanos contract with TIM will cease in April 2007. Meanwhile, TIM is rapidly trying to build more stores, but is understood to have only around 200 compared to rival Vodafone’s 350. While billed as a mutual decision, there is no doubt that in the short term the firm will suffer from the loss of its main distribution channel.
As for the final hurdle in the deal - the minority shareholder’s buyout, the process is almost ready. “I expect everything to be ready within two weeks and that the public offer will be launched soon after that,” an insider told this newspaper. All the regulatory and anti-competitive approvals are through but there have been some other procedures to complete.
Opposition MPs have asked why Cosmote bought the Germanos shares at what they see as a high price of 19 euros per share. The share is currently trading at 18.80 cents a share and is expected to rise to 19 euros closer to the offer day.
MPS and leftist press have asked why the deal value was almost the same as the price TPG and Apax Partners paid for TIM Hellas, pointing out that an operator would normally be more expensive than a retailer. But the reality is that it appears that the deal is cheap at the price. With one sweep Cosmote looks set to blow the competition out of the water.
