EUGEN SCHWAB-CHESARU, THE MANAGING DIRECTOR OF PIERRE AUDOIN CONSULTANTS EASTERN EUROPE: "The BSE - a submediocre institution with a deplorable image"

The merger between Romtelecom-Cos-mote, as well as the listing of the shares of Romtelecom on the Bucharest Stock Exchange, may happen this year, according to sources from the telecommunications market. Mr. Eugen Schwab-Chesaru, the general manager of Pierre Audoin Consultants (PAC) Eastern Europe, told us: "The merger between Romtelecom and Cosmote would not necessarily have a major impact on the Romanian telecom market (in terms of size or evolution/trend), but it might clarify the position/offer of the two operators and would give them a brand awareness comparable to that of its main competitors (Vodafone and Orange). It would also provide an opportunity of gaining speed in integrated IT&C offers, which is almost completely missing from the Romanian telecom landscape, but is very high in mature markets".

The officials of the communications division of OTE Group recently said that there are ongoing talks between OTE, the majority shareholder of Romtelecom, and the Romanian authorities, concerning the merger between Romtelecom and Cosmote.

"We are hoping that the future shareholders, the Romanian government and OTE, will reach a mutually beneficial agreement, in the near future. The integration of the fixed and mobile telephony services is the future of telecommunications, by providing customers a complete range of telecommunications and entertainment services, as well as the growth of Romtelecom and Cosmote România, for the benefit of consumers and of the market".

Mr. Eugen Schwab-Chesaru considers that the time is now right for this merger. "I think that it would have been even better if was done two or three years ago, that would have added a few years of brand consolidation and portfolio positioning", he added.

In 2011, the Romanian state agreed with OTE and Deutsche Telecom the appointment of a common CEO at Cosmote and Romtelecom and the listing on the Bucharest Stock Exchange, within a year at the latest, of Romtelecom, or of the entity resulting from its merger with Cosmote. But after the signing of the agreement, the process was deadlocked. Last year, Dan Nica, the minister of Communications and Information Society, announced that he was postponing the merger due to political tensions.

Mr. Eugen Schwab-Chesaru considers: "Any hesitation from a majority shareholder, even more so when we are talking about the Romanian state, which is also a market regulator, is counterproductive, both in terms of its image and that of the companies involved, as well as for investment plans. I don't think that the market itself was affected, but the companies and the credibility of the state definitely were".

As for the listing of the shares of Romtelecom or of the entity resulting from the merger, the general manager of Pierre Audoin Consultants (PAC) Eastern Europe was blunt: "I don't believe in the Bucharest Stock Exchange (BSE) at this time. But if such a listing were to come together with 6-7 other significant listings in sectors such as energy, utilities or transport, then they could improve to a certain extent the deplorable image of the Romanian securities market. But I don't think that the conditions for a successful listing at this moment are met, even though on a global level the valuation of companies has often times exceeded the historic highs, the BSE is still is still struggling with a sub-mediocre pace that only attracts the attention of short and very short term speculators".

The Minister of Communications, Mr. Dan Nica, was saying, in mid-2012, that the Romanian state needs to make an IPO of the shares it owns in Romtelecom: "We need to conduct this process of taking the shares of the state in < Romtelecom > public, in order to maximize the profit. We hope to complete this action, so that anyone who wants to become a shareholder of that company will have the ability to do so. It probably wasn't an intelligent decision from those who did not take advantage of the period of economic growth and the capital surplus that existed, as they thought that when the crisis is heavier, it is better to sell. I don't agree with that. I think that it was a mistake that what we decided back then together with OTE - to sell the shares on the stock market - didn't happen. It would have been a good thing and it was a very good signal".

Greek group OTE owns 54.01% of the shares of "Romtelecom". 45.99% of the shares of the company are owned by the Romanian state, through the Ministry of Communications and Information Society (MCSI). German telecommunications operator Deutsche Telekom owns 30% of OTE.

Founded in 1976, PAC is a privately owned company, specializing in market research and consulting for the software and IT&C services market.