By Georgina Prodhan and Angelika Gruber
VIENNA (Reuters) - Hutchison Whampoa telecoms unit Drei Austria expects only one or two new carriers to launch services on the back of its network this year, its chief executive told Reuters.
Drei was forced to offer wholesale access to its network to up to 16 carriers as a remedy to stimulate competition and keep consumer prices low when it bought competitor Orange Austria for 1.3 billion euros (1.06 billion pounds) at the beginning of 2013.
The Austrian market, in which mobile tariffs have risen sharply in recent months after years of being Europe's lowest, is being closely watched by competition regulators deciding whether to approve other European telecoms mergers.
No new so-called mobile virtual network operators (MVNOs) have launched on Drei's network since the Orange takeover. CEO Jan Trionow told Reuters in an interview they would probably start in the second half of this year. "We see perhaps one or two there. It will not be a huge wave," he said. "It is no secret that some competition guardians had hoped that MVNOs would appear sooner. It is too early to judge the effectiveness of the remedy."
Drei competes with market leader Telekom Austria, which is being bought by Carlos Slim's America Movil, and Deutsche Telekom's T-Mobile as well as more than a dozen MVNOs including LycaMobile and Red Bull Mobile. It has signed MVNO deals with Liberty Global's UPC - a major cable player in Austria and elsewhere in Europe - and televoting firm Mass Response, but these have not yet launched. Trionow said talks continued with "some others".
EU regulators aim to decide next month whether to approve Telefonica's $12 billion bid for KPN's E-Plus in Germany and Hutchison Whampoa's planned $1 billion takeover of Telefonica's O2 in Ireland.
Hutchison also has European telecoms operations in Britain, Italy, Sweden and Denmark, and is generally seen as undercutting its rivals on prices to win over customers.
It said at the time of the Orange takeover it aimed to increase its market share in Austria to 30 percent from a combined 22 percent at the time. Telekom Austria now has 43 percent of the mobile market and T-Mobile 31 percent.
"We see good chances to go from our current 26 percent in the direction of our fair share of the market, that is, in the direction of 30 percent, without setting a figure in stone," Trionow said.
ATTRACTIVE CONDITIONS
While Telekom Austria has hiked prices for existing customers in the past months and T-Mobile has made smaller steps in the same direction, Drei has done little more than eliminate its very lowest tariffs.
"We are more efficiently positioned. We can afford to keep offering attractive conditions, even in the current market environment," Trionow said. Drei made a 24 percent EBITDA (earnings before interest, tax, depreciation and amortisation) margin in 2013, compared with Telekom Austria's 28 percent in its home market including fixed lines, and T-Mobile Austria's 23 percent. Unlike Telekom Austria - which saved 57 million euros in operating expenses in the first quarter, mainly by cutting generous handset subsidies it had used to attract and lock in customers - Trionow said subsidies were important for Drei.
"I believe that subsidising devices will remain an important condition of every Austrian really being able to use our services. In that respect, it will remain important," he said.
Trionow added that a lack of must-have new phones in the market - with nothing to compare with the first Apple iPhones or Samsung Galaxies - made customers less interested in upgrades. "There haven't been any more revolutions of late. At the moment when something dramatically new comes along, the demand for subsidised devices will surely rise again," he said.
(Editing by Michael Shields)