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Through its media outlets, The United Group Is Attacking Telekom Over its Vigorous Growth
Foto: Shutterstock


Through its media outlets, The United Group Is Attacking Telekom Over its Vigorous Growth


As revealed by Kurir, by reporting on Telekom's operation based on selective data, the United Group is attempting to weaken the state-owned company which over the past two years has become a serious competitor in the entire region. It is jeopardising it and preventing its further expansion in the market.

Through its N1 TV, the United Group continued to pursue a negative campaign against Telekom Serbia, about whose operation it presented to the public selective data, which could inflict a serious damage to it. The aim of the latest spread of malicious news in the N1 television programme and portal is, by all means, an attempt at eliminating healthy competition in the telecommunications field. As N1 is owned by the United Group, it may be concluded that the aim of the campaign against Telekom is exclusively the economic interest of the owners of the United Group.

In the past two years, Telekom Serbia has recorded robust growth in the market of cable operators and with its numerous business successes it has become a serious competitor to the United Group in the entire region. This is shown by data about the market of cable operators where Telekom Serbia, according to RATEL’s report, accounts for 41.5%, while SBB holds 48.8% of the market. The remainder, less than 10%, is shared by small operators.

In place is a clash between two large and strong companies which have the same objective – to control the largest possible portion of the market. However, while in the past the United Group was exceptionally dominant, it seemed there was no real rivalry between the two companies. But, when Telekom began to expand its operation and increase the number of users, the things changed.

The United Group does not have an adequate business response to Telekom’s market expansion in the past two years, and the possibility of the Group’s further spreading in the market has been largely reduced. That is why the following question is asked – when the United Group, through its media outlets and the so-called independent experts, criticises the operation of Telekom as a company in majority state ownership, does it do so in the public interest or it is perfidiously attempting to hinder and weaken Telekom and indirectly the state as its majority owner.

Tendentious interpretation

It seems that the United Group, in its campaign, resorts to all means to keep a dominant position in the regional market for its company, whose direct competitor is Telekom Serbia. This is why the United Group’s owners have been trying, over the past several years, through their N1 television, to present Telekom as a company recording “a constant and precipitous fall in value” and without prospects. However, lacking true arguments, they resorted to unsubstantiated assessments and statistical indicators which can create confusion and distort the picture about the stability of its operation. This is most evident in the part of the campaign presenting the picture about the future operation of Telekom. And this is why.

Unlike the United Group, the dominant role in Telekom’s business model is played by fixed and mobile telephony, which is a heritage of the previous era of telecommunications services. It is no secret that in the new era, the revenues in both segments are increasingly smaller and entail high and unchanged operational maintenance costs, which is true for the entire telecommunications industry.

foto: Shutterstock

Without risky borrowing

It is also understandable that at the very start they exert a strong pressure on the profitability indicators of this state-owned company. This is why any absolute comparison of any result over years exclusively in the context of the analysis of the project of acquisition of cable operators, as it was done in the report on N1 – is impossible and untrue.

When N1 says that Telekom’s profit in 2019 rose “by five million euros only”, they are forgetting to mention the crucial thing in this calculation – Telekom’s profit would have fallen had the cable operators not been bought and had it not recorded profit from them. But as the things stand, growth was recorded. Telekom would have almost certainly gone bust in the cruel market had it not purchased cable operators. The broadening of the business model to the cable segment was an indispensable turnabout which ensured to Telekom survival and market competition with competitors, which is something experts have concluded as well. Telekom’s borrowing to finance these new business ventures was practically a strategy without an alternative, and the accompanying costs were the necessary price which had to be paid.

Despite this price, Telekom does not have risky borrowing. In economic vocabulary, the ratio of Telekom’s debt relative to EBITDA is three times, i.e. the debt is three times higher than the annual operational profit, which is, in fact, considered the limit before a company, if it continues to increase the ratio, enters the red zone. According to data obtained by Kurir, this ratio of the United Group is seven times, which is a much worse indicator than Telekom’s. Judging by the same data, at the start of the year, the United Group posted a record debt of three billion euros, which is almost a three times higher debt than Telekom’s. Or, for the sake of comparison, the debt of the United Group is almost at the same level as the entire public debt of Montenegro.

Consolidation and then profit

This is why it is possible to say that while this company is reporting about Telekom’s poor operation in its media, it seems rather that its operation is taking place on the margins of over-indebtedness and continuous generation of net losses. As the activity of the competition in the local and regional markets has aggressively increased, the United Group has reached its historical maximum in over-indebtedness and net losses. The optimism of the United Group’s management in regard to borrowing in the past years, due to negative results and over-indebtedness, has now been replaced with the strategy of disloyal competition. Namely, the Competition Protection Commission has launched an investigation against the United Group due to its monopoly behaviour. The Group was sued over copyright, unauthorised use of the public infrastructure of utility companies, it is conducting disputes with minority shareholders, the prices of its bonds on stock exchanges are plummeting, it focuses on operation through tax havens and similar.

All this time it is attacking Telekom, describing its investment, on the N1 television, as “over-inflated acquisitions whose quality is questionable”. It is clear even to laymen that the acquisition, i.e. procurement of goods does not imply immediate profit. Only after the period of consolidation, i.e. integration of the acquired goods or companies in the system, is it possible to expect palpable justification of the purchase. Or, as it is explained in economics, only then is it possible to see the period of rising profit from acquisitions and the materialisation of benefits and envisaged synergies in financial statements. The complete truth, which N1 did not report, is that Telekom, even with the weight of fixed and mobile telephony, recorded a net profit of 21 million euros in 2019, while the United Group, according to data obtained by Kurir, recorded a loss of 60 million euros in the same year.

Economist Miladin Kovačević says for Kurir that unsubstantiated assessments of Telekom’s operation, reported by N1, are ridiculous, tendentious and ungrounded.

Unsubstantiated assessment

– It is ridiculous that someone is dealing with someone’s operation in such a superficial way. This is a futile job without an expert. In the normal world, this is dealt with, among others, by audit firms. It is entirely senseless that someone speaks in such way about the value of a company’s investment in acquisitions, and, even more so, to assess the justifiability and profitability of such acquisitions in such an unsubstantiated way. I reliably know that in the past years Telekom has not been in the negative territory in terms of its operation. Its entry into the cable business is of course logical, as it is a booming business. ICT is a rapidly growing sector. No one would recklessly go buying, for instance, cable operators – explains Kovačević.

Research journalist Marko Matić states that N1 TV continues to behave as a PR service of SBB, and does not miss a single opportunity to create and spread negative news about Telekom Serbia.

– The problem is that in this ordered campaign, professional and ethnical norms are being brutally violated, facts are being manipulated, and the reports are one-sided and biased and it is not possible to hear in them the attitudes and arguments of the other party. It is just sufficient to see the news and reports about Telekom that N1 has published in the past several months and to understand that in place is a campaign which targets Telekom Serbia, which, by acquiring smaller operators, has again returned to the market and has started to jeopardise the primacy of SBB – says Matić.

Chart about the debt-to-EBITDA ratio

Telekom’s debt is lower than the leading world companies

The level and risk of companies’ debt is often measured by the ratio of debt to operational profit, i.e. the EBITDA result. The higher the ratio, the disproportion between the pressure of financial obligations on profit increases, i.e. the risk of the inability to settle debt increases.

foto: Infografika

In line with this, it is not only that Telekom’s debt is lower than the debt of the leading world companies and than the average of the entire telecommunications sector, but the large process of acquisition of operators in the local and regional markets and investment in creating own television content was completed while preserving high credit worthiness. It is interesting that according to this indicator, Telekom Serbia is equal to Deutsche Telekom, and is incomparably better quoted than the United Group.

Telekom files a suit over attacks

Due to the attacks of the United Group against Telekom Serbia over the past several weeks, whereby the Group uses the media outlets in its ownership, Telekom Serbia decided to file a suit against this company and claim damages. In its press release, Telekom reminds the public that the United Group, primarily SBB, started to lose the monopoly position which it kept for years from the moment when Telekom changed its business strategy.

Unsubstantiated assessments abounded, but there was no analysis

Groundless criticism of stock exchange expert Gujaničić

Stock exchange expert Nenad Gujaničić, who in N1’s report spoke negatively about the operation of Telekom Serbia, did not give clear answers to the questions of Kurir concerning the used methodology, the approach to sectoral trends and other details of the analysis which had to precede his statements. Namely, it seems that a methodological approach was lacking and the facts were replaced with subjective perception, personal thoughts and premature conclusions.

Gujaničić, contradicting his statements on N1, believes, judging by his answers to the questions of Kurir, that the deadline “of somewhat more than one year to assess the cost-effectiveness of extremely huge investments of the company is very short” and that “the effects of Telekom’s strategy will be fully visible only after three-four years after the start of investment”. Still, he gave a rather slapdash statement for N1, saying that “the quality of the investment is questionable and that one may say that the acquisitions are rather over-inflated, and it is possible to say that the expectations of fast pay-off of these acquisitions do not hold true”.

Gujaničić also believes, as he stated for N1, that the real value of Telekom would be seen with its quotation on the stock exchange, which is highly questionable. As the largest percentage of shares is owned by institutional investors who do not trade in them, the limited trading in a smaller number of the remaining shares, which are freely traded on the stock exchange, would not result in market price formation.

Danica Popović insulted over plagiarism

She asks for an apology instead of apologising over theft suspicions

Instead of apologising to the entire academic public because of the suspicions that she plagiarised a university textbook, Danica Popović, a professor at the Faculty of Economics, requested from Kurir an apology as it revealed and wrote about this affair. As she purportedly felt insulted, she refused to answer the questions of Kurir about the justifiability of her assessments which she presented in the N1 report about the operation of Telekom. Instead, she requested from our paper to apologise to her.

Professor Popović is insulted and not humiliated, although the expert commission of the Belgrade Faculty of Economics recently ascertained that she stole the translation of her late colleague professor Stojan Babić, in the textbook on Monetary Economy, which she then presented as her work. This confirmed our writing about suspicions that Danica Popović gravely abused royalties and took as her own the translation of even 11 first chapters, translated by professor Babić, as the expert commission ascertained. The expert commission will send the report to the ethics commission, which will, in accordance with the Rulebook on the Procedure to Determine Non-Academic Behaviour, submit a report to the dean of the Faculty of Economics within 15 days. He is authorised to send it to the Professorial-Scientific Council, together with the proposal of sanctions.

Robust growth in the past two years

These business moves of Telekom Serbia are fretting the United Group

The N1 television has become particularly aggressive in its attacks on Telekom Serbia in the period when the state company made several business moves which, apparently, spoiled the plans of the United Group and its endeavours to dominate the regional market. The United Group was particularly distressed over Telekom’s business successes in the past two years, which brought to users a more comprehensive and higher quality service, ensuring to this state company a much stronger position in the market across the region. These are some of them.

1 Purchase of cable operators in Serbia and Bosnia and Herzegovina, which resulted in Telekom’s fast expansion and the prevention of further growth of the United Group, which was rising mainly through acquisitions.

2 Strengthening of Arena Sport (taking over from the Sport Club the NBA, Spanish and Portugal League), lengthening the agreement until the end of 2024 for the Champions League and the Europa League, the start of work of Arena Sport in Slovenia

3 Releasing the satellite TV m:sat in February 2019 as a response to Total TV of the United Group, which already now has around 100,000 users.

4 Building the optical network in large cities. This network has a superior quality of internet speed.

5 Broadening the television contents and offer. Last year Telekom Serbia finally introduced FOX channels, and began with intensive development of own channels and production.

6 Signing exclusive contracts with RTS and a number of channels from Bosnia and Herzegovina for distribution in the diaspora, whereby Telekom became the leader in that market. For these reasons, last year Telekom filed criminal charges for piracy in Germany against NETTV, the daughter company of the United Group.

Hypocrisy of the programme director of N1

Jugoslav Ćosić feigns professionalism and avoids answers

Jugoslav Ćosić, the programme director of N1, has been, for years, constantly referring to professionalism, but in practice he regularly shows unprofessionalism. It was the case this time as well – Kurir sent to him concrete questions about the work of the television he leads, but Ćosić failed to give a concrete answer.

All the same story...

Asked two concrete questions: “Based on the analysis of your reports and articles about Telekom Serbia, it is striking that this company was not shown in a positive context in a single of them. Why is that the case?” and “Are your owners pressurising you to write negatively about the campaign of Telekom Serbia?”, Ćosić, as usual for him, resorted to demagogy, bragging about and attacks.

He first referred to the attitudes of the experts whom N1 invited to talk about Telekom and then stated a number of accusations against Kurir, evading the answer about the pressures of his owners. He admitted that the television he leads must deal with Telekom’s work, but without specifying why only this company is presented to such an extent in their programme as, in addition to Telekom, the state is the owner or co-owner of many other companies with which N1, unlike Telekom, does not deal with conspicuously or deals with at a much smaller intensity.

– According to experts’ assessments, Telekom, in a non-transparent process of operation and without the knowledge of his shareholders, significantly reduced the company’s capital. N1 believes it has an unconditional obligation to deal with the operation of all public enterprises and companies owned by the state – said Ćosić, among other things. Just like N1, Kurir also deals with the operation of public companies, but in the interest of citizens as a better work of these companies is to the benefit of all citizens.

Ćosić also accused Kurir that in its articles about the United Group, which owns N1, it did not invite the other party to give comments, which is not true. The United Group had the chance to speak for Kurir and its answers were reported. With such move, Ćosić, although faking professionalism, showed once again that he is completely different than the picture by which he wants to present himself and N1.

Spreading fake news

It is particularly hypocritical that all this is being done by the N1 television, which was, over many weeks, spreading the fake news that it is forbidden in the offer of Telekom’s cable operators, whereas, in fact, the United media itself cut off the signal. However, the truth, together with solid evidence, emerged. It was shown that the United Group never had the intention to boost ratings of its N1 television, but it aimed to blackmail the competition and secure for itself even higher earnings on the sale of its far more commercial channels.  

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