Prospects of the ICT sector in Greece

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Study of the ICT sector in Greece: Current Situation and Future Trends Deliverable 14: Prospects of the ICT sector in Greece-policy implications important firms in the sector. Besides, large firms have greater profit margins than the smaller ones. Firms from the IT sector show some good records (especially those employing 11-49 persons) by increasing their turnover. Some of the most profitable ones further increase their profits, while losses are reduced considerably in 2004. Besides, their gross profit margin is decreasing at lower levels than Telcos. In the later, the increased competition, the maturation of growth rates in mobile carriers, the mobility in the fixed telephony (“alternative carriers) market and the substantial decrease of OTE’s figures characterize the relevant financial environment (deceleration of revenues, profits), The three basic mobile carrier companies represent henceforth the 19% of total turnover of the ICT sector. In the relevant sub-sectors, telecommunication services remain the most dynamic part of the ICT market, while IT Services hold also their good position. On the contrary, manufacturing and software show some disappointing results, while profits in the - heterogeneous and volatile to a certain degree – sub sector of ICT Trade are slightly increasing. However, this upturn trend seems to cease in 2005 with some low results in sales, revenues, and profits. In IT, sales of the large firms hold their last year’s levels while profits decrease. In Telecommunications, OTE’s losses keep on having a negative impact on the sector. In any case, the restructuring actions in that market (exits/ acquisitions) and the investments on infrastructure will influence the next fiscal years. Nevertheless, the telecommunication market is growing, attracting the interest of foreign investors as well 23 . However, results of the Athens stock exchange listed firms for 2006 and forecasts for the sector (cf. Appendix 3) show an increase 3.4% and an even more intense increase (by 6-7%) respectively in 2007 and 2008. Therefore, poor results of the past and the main impacts of the stock exchange crisis in 2000- 2002 seem to be overcome, despite the fact that there are some pending issues and further business actions that need to be completed. Although results for 2005 are not encouraging, the financial environment is not as unstable and problematic as it was in 2002. Furthermore, increased liquidity seem to support investments, especially in the telecommunications’ sector. Basic barrier for the growth of the sector: the limited broadband diffusion 23 More recent forecasts show that the turnover of ICT sector will be reduced by 3.1% in 2006 (or 2.1%, if retail trade is excluded). This recession of turnover is more intense in the wholesaling trade (- 3.8%) and the equipment manufacture. On the contrary, IT services increase their turnover by 4.2%. A marginal recession smaller than 1% is recorded in telecommunication services (Cf. Appendix) October 2006 Observatory for the Greek IS 32
Study of the ICT sector in Greece: Current Situation and Future Trends Deliverable 14: Prospects of the ICT sector in Greece-policy implications The quality of Telecommunication infrastructures is considered by most of the firms poor compared to European averages, limiting the development of new services of high added value. Thus, a basic barrier for the growth of the ICT sector in Greece is the limited diffusion of broadband. The new improved infrastructures are the precondition for growth, as they will allow the development of additional services of higher value - added. This entails benefits not only in terms of an extended use by the current users, but also in terms of attracting nonusers, as the ICT products/ services become more attractive. The rapid development of broadband connections within 2006 is a positive change, but at the moment it reflects a technological upgrade (dial-up connections’ upgrade) that reflects the needs of the current users. The content and the services (e.g. triple play) that could be developed on upgraded infrastructure will broaden the current ICT market as they will attract non-users. Although it is the telecommunication market that will be first positively affected, due to the technological convergence, IT will also have significant positive spillovers, allowing for a growth of the ICT sector as a whole. 4.2. Conclusions for the prospects of ICT sector in Greece: growth under certain preconditions On the basis of the aforementioned findings that demonstrate the basic characteristics and the operation framework of the domestic ICT sector, along with an analysis of the data that were gathered and the trends that were valuated under the present study, what can be argued is that the growth prospects of ICTs sector during the next two years are moderate optimistic. This belief is based upon the restriction of the effect of demand / supply barriers that still exist in the domestic ICT sector and on the reinforcement of some positive parameters that characterize the sector. Firms are moderate optimistic, although they recognize that the market remains difficult and has still more barriers than growth resources. Furthermore, although they are more reluctant for the prospects of the whole ICT sector, they are significantly more optimistic for their own status. They seem to recognize to themselves certain competitive advantages and their capability to survive in an even unfavourable environment. This on the other hand means that weak players are still present on the market, while there are competitive firms that can lead the industry to growth. The verification of these expectations depend however on the intensity of the positive trends in the elements of growth and also the restriction of the effect of the relevant barriers. The macroeconomic environment is still favourable October 2006 Observatory for the Greek IS 33
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