Telecom analysts predict that there will be a continuation of the telecom market consolidation through mergers. Although there was talk last year of certain possible merger, the last take over in that industry was a year and a half ago.

Under pressure of the financial crisis, a few of the eight Croatian alternative land line operators are starting a new round of negotiations. To some of the companies high debt loads, reduced bank financing and a necessity for capital investments, are threatening their survival. In these kind of conditions banks/creditors feel it is up to them to take an important part in the consolidation of the market. This is why this initiative is thought to have come from them rather than from the owners of the operators, leaving behind their vanity and unrealistic expectations. Those close to these business-financial circles say that few alternative operator companies are a part of these negotiations but that Optima and H1 telecom are the ones most likely to merge because of their similar business profiles and positive business effects that might come of it. The same sources tell us that companies soon will bring to the table the financial analysis of this merger. Since Optima has the largest market share among the alternative operators, and has invested great deal of funds in their own infrastructure, in merging with H1 we expect it to be the dominant company, although it’s financial stability is under the pressure of these previous investments. According to the nine month financial report, at the end of September 2008 their long term liabilities came to almost 490 million kuna, and short term to around 350 million kuna. In spite of improved business results and higher growth of income to liabilities (38 to 31%), Optima will still experience low solvency in the next few years. H1 is in an even worse position. While Optima can still count on the financial support from Zagrebačka Banka, H1 will find a weak support from Hrvatska Poštanka Banka, also their 42% shareholder since last year, when it made a bad strategic decision to exchange H1 liabilities toward the bank with H1 company shares.
(AmCham)