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by CorD
Despite the severe economic downturn, Telekom Srbija ended last year on a successful note. As Telekom’s C.E.O., Branko Radujko says for CorD that 2010 will be even more challenging for the company, but he is confident that Telekom will continue to be profitable. This also largely depends on Telekom’s capability to stand up to increasingly stronger competition. Telekom has strong human resources and experts ready to participate in an international hi-tech ‘game,’ as well as to adapt to and advance technology in order to continue finding efficient solutions. Judging by relevant economic indicators including profit, Telekom is quite different from public enterprises in Serbia. Since the company is actually not a public enterprise, it should not be treated as one when it comes to IMF’s recommendations, such as keeping salaries at their current level. This successful company is forced to share the destiny of public enterprises and state administration which can have adverse effects on Telekom’s development and its position on the Serbian and regional markets, particularly in terms of hiring experts. Without highly educated and well-paid professionals, who are so important in both mobile and ground telephony, Telekom stands very little chance. According to a survey conducted by Medium Gallup and the daily newspaper Blic, Telekom Srbija was the best company in Serbia in 2009. What is your projection of the company’s end-of-the-year accounts? Despite a slower revenue growth in a year of economic crisis, it was still higher than expenses, and, as a result of that, we generated a record high net profit of close to 15 billion dinars. This is hat we achieved in Serbia. Telekom Srpske had a profit of 60 million euros, while M:tel CG, the third mobile telephony operator in Montenegro, ended last year with a positive EBITDA of over 7 million euros. I would also like to point out that we have reduced our debt ratio from 42% to 35%, which is really an exceptional result in a year that was as difficult as the last one. Last year was quite difficult for many mobile telephony operators in the world. For example, Deutsche Telecom lost over a billion euros in Great Britain, unlike 2008, when they generated huge profit. In oland, the company also recorded a loss. What is your view of last year, globally speaking, and what do you expect in 2010? I think that our shareholders can be very happy with last year, which was quite disquieted at the very beginning. At the same time, I expect 2010 to be even more challenging, and we are doing everything a responsible management can do in order for it to be successful and to continue ascending. This will not be easy by any means, and the problems that the biggest global operators are facing reflect that. Although Telekom Srbija is largely owned by the state, a Greek partner also has a share, and your work is supervised by Citibank, on the account of granted loans. What bearing does all of that have on the company’s structure, organization, the way it functions, and the way decisions are made? Quite a lot. Privately-owned foreign investors, like OTE in our case, as well as other important stakeholders like Citibank and several other creditors, bring a completely new quality to the company in terms of corporate management and consistency in application of accounting policies and reporting, i.e. internal control in general. There are also somewhat more complicated procedures when it comes to decision making which is sometimes difficult to comprehend for our partners. Anyhow, I think that having a foreign shareholder in the company is useful and desirable. What sets Telekom apart from other public enterprises in Serbia? In which way do your work and responsibilities differ from your counterparts in public enterprises? I really don’t want to comment on public enterprises and their management. Everybody is trying to accomplish the best possible results. Telekom’s particularity stems from the fact that the company has a foreign investor that is present in several other countries and that uses international funding in order to finance development and regional operations. In addition, Telekom is not a public enterprise in the formal sense of the word, but a shareholding company. Practically speaking, it would be understandable if we had been treated as a public company in our ground telephony segment, but ever since the legalization of the VoIP operators in 2008, the issue of the second CDMA license in May 2009 and the second ground telephony license (which will happen in few days), Telekom will no longer resemble any public enterprise in any respect. I would like to remind you that in our only profitable segment, i.e. mobile telephony, we have very tough competition in Serbia, especially when it comes to Internet and multi-media services. Judging by salaries, we noticed that you and your employees have lower salaries than your colleagues in other public enterprises which have been recording losses for years. How do you explain this absurd situation? My main concern is my employees’ salaries. They are definitely not based on the success and competitiveness parameters in our sector. I have talked on quite a few occasions with the highest state officials, which actually own 80% of Telekom. I believe that we are going to divide companies into categories according to the share that the state has in them, as well as in line with their business activity, strategic importance, competitiveness etc. Also, I believe that this will be the base for determining salaries in public enterprises on one hand, and companies with a dominant state ownership on the other. If we don’t do this, companies that are state-owned will not be able to sustain themselves in the long run, will not be able to fend off the competition and their value will decline. And that is certainly not good. What do you plan to do in order to prevent skilled professionals from crossing over to your competition? They are already doing that and we cannot prevent it. We have recently lost three excellent engineers in the space of just one day since they had been offered a higher salary in other companies. One of them went to a company that isn’t even a competitor of ours, but a contractor. As much as you might like Telekom, it is very difficult to refuse a salary that is much higher than your current one. This is one of the biggest problems that our company has been facing, and we, as in management, are not authorized to deal with it. Is it easy to find young experts today who are ready to change things for the better and carefully monitor the latest tendencies in the telephony sector? Unfortunately, we have to fight really hard for each of them. We would like for some of our citizens who left the country in the 1990s to come back. They have become respected professionals abroad. Some of them have inquired about working in Telekom, but the salaries we could offer them were too low. On the other hand, we have had a lot of young and talented engineers who worked under contract with us, but when they realized that there was no legal way of our offering them permanent employment or for them to get better status within the company, they left to work for our competition or emigrated. Do you expect a third or maybe fourth ground telephony operator to come here, aside from Telenor? The market will completely open up at certain point. I believe that our market will become deregulated if this operator does get the second license. Otherwise, there is a third player, so to speak, that has a CDMA license. JAT Airways, for example, was not able to withstand foreign competition and its market share went down considerably. What is your projected loss in ground telephony once your subscribers decide to go with the other company, and how much of a profit do you expect when some of Telenor’s subscribers cross over to you? We stand to benefit the most from the fact that prices will be freely formed. I would always work with a smaller market share and real, economically feasible prices, than with 100% market share but with social prices that bring no profit. We expect huge revenue from leasing capacities. Do you plan to launch new products in order to compensate for loss in revenue? Do you think that your subscribers will feel the brunt of the loss? I do expect a decline in our market share, but not a reduction in total revenue. We can finally say that we expect to be profitable in ground telephony. Our services will be more detailed and this is where we expect companies to fight for commercial supremacy.
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Despite the severe economic downturn, Telekom Srbija ended last year on a successful note. As Telekom’s C.E.O., Branko Radujko says for CorD that 2010 will be even more challenging for the company, but he is confident that Telekom will continue to be profitable. This also largely depends on Telekom’s capability to stand up to increasingly stronger competition.