Croatia: New power player Telecom due to the electricity market will have a higher return on equity

, SEE Energy News

The largest domestic telecom operator HT began offering electricity supply service to residential and business customers from the 9th December 2013 HT hopes to create an additional source of revenue and increase customer satisfaction by connecting new services to offer. The company has estimated the value of the Croatian electricity market in 2012 to 11.5 billion HRK, with an annual growth rate of 7.5%.

In an environment that is characterized by prolonged recession and additional pressure created price wars, regulation and saturation of the mobile market, the Management Board of HT sees opportunities in services PayTV and broadband, and wants to add more ICT segments. Accordingly, the core business of the company will experience a radical change in the direction of the cloud and all-IP services to maintain EBITDA margins above the industry average. New sources of revenue through close activities such as digital services and ICT will be added to it, and new activities which aim to take advantage of existing infrastructure and increase customer loyalty by offering a broader suite of services.

The company sees significant growth opportunities in these segments, but the negative side of such expansion is diluting the margin. However, given that most of the new services have little need for capital investment, depreciation costs should be low, which would result in the creation of an additional return on equity. Ultimately, the Board sees revenue structure in 2017 as 67% of core business, a 17% of close activities and 16% of new business.

The majority owner of HT Deutsche Telekom has already begun to implement a similar model in Magyar Telecom, where by 2017 plans to generate 18% of revenue through activities outside the core business. Accordingly, the revenues would now begin to grow, while the EBITDA expects to exceed the level of 2013 by 2017, by which is obvious that there will be further dilution of margins.

Source; Serbia Energy See desk

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