According to Wind Hellas, creditors that hold a 80% controlling bond interest in the company agreed to a payment freeze, otherwise known as a standstill agreement. This agreement opens the way for Wind Hellas to proceed with the restructuring of its outstanding debts.
The decision, which was taken for granted by the market, nevertheless provides the Wind management with improved maneuvering capabilities thus allowing them more margin and flexibility in managing the company’s debt situation. The breathing space provided by the creditors effectively injects management with renewed confidence and opens the way for a renewed effort to revitalize Wind.
Greek Mobile Telecommunication Service Market Conditions
The Greek Mobile Telecommunication Market is by its nature a mature oligopoly characterized by three major mobile telecommunication service providers: Wind Hellas, Cosmote and Vodafone Hellas. Being a zero sum game, any share loss by a particular player implies an equivalent share increase by a respective player.
In addition, any price reduction by any one player implies a resultant price reduction by the remaining players triggering the possibility of a price war, and a negative price spiral with unforeseen long term results (Galbraith: A Journey Through Economic Time;1994 Houghton Mifflin; pgs 196-197).
Because of market conditions and internal corporate pressures (for example pressure to maintain European operations profitability with the threat of selling off non profitable subsidiaries) certain Greek Mobile operators in an effort to undercut the competition and gain quickly market share engaged in a price war in 2009; by breaking the status quo through an aggressive bundled offering of free SMS and voice minutes. This was immediately met by the remaining operators and the market immersed itself in a negative price spiral.
The resultant price war as well as the existing macroeconomic, regulatory, market, exogenous shocks coupled with unforeseen internal entrance barriers, and technology disruption parameters resulted in the Greek Mobile Telecommunication Industry loosing about 500 billion Euro in 2009.
Further losses may happen in 2010.
Renewed Creditor Confidence
Going back to the Wind debt restructure, the renewed creditor confidence translates to an added margin of about 40 million Euro which was the outstanding interest that the corporation had to pay creditors on the 15th of July 2010.
The next crucial date for the company is the 31st of July, 2010 where the creditors decide their role and quantitative commitment in the new debt structure.
Wind has as a strategic goal the reduction of its quantitative debt from 1.8 billion Euros to about 700 billion Euros, a not so easy task considering the present macro economic situation in Greece: Many creditors consider Greece a high risk country to invest in thus limiting the investment initiatives towards corporations operating in Greece.
Single Strategic Investor
Local and international market analysts have pointed out that private investment funds are limiting their participation in Greek market initiatives, and in the Wind case investment may be limited to one strategic investment interest which may and most probably will be present Wind majority owner, N. Sawiris.
Sawiris may end up assuming control of Wind once more, with reduced debt, but with the urgent need of new capital infusions.
Antonis Hontzeas - Antonis Hontzeas has been in the forefront of the Telecommunications industry for over twenty years. Tenures include positions ranging ...
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