In Romania, a country with a free falling economy, there are investors willing to offer millions of dollars for several kilometres of cables linking houses or satellite transmitters, while nobody knows how to get rid of the piles of scrap iron gathered by plants such as IMGB or Siderca.
The lack of modern infrastructure, as well as opportunities for important gains, have included the domains of telecommunications, IT or cable television services in the top of investor interest.
Cable television, a sector that in Romania comes first as to the number of subscribers in Central and Eastern Europe, with 3.5 million persons, will attract most investments over the next years, since the telecommunications market will be liberalised on January 1, 2003.
The first sign came from the direct investment poured in May by AIG New Europe Fund in Astral Group, under the form of a capital raise by over 20 million dollars.
The keyword within this sector seems to be activity concentration, since several acquisitions or mergers have been sealed during the last months. "Over the following years, the market will only include the companies that will have adopted a professional attitude, relying on a solid construction of their networks," stated Radu Cristian, Astral TV director.
American company UPC is a giant in this field whose representatives are looking for powerful companies on the Romanian market. The US firm currently has almost 300,000 subscribers, after having acquired, at the beginning of this year, several Romanian cable operators. "In order to develop the networks, investments start from a minimum of 50 dollars per apartment," UPC manager for Romania Richard Anderson said.
Implicit costs, calculated for companies that are going to operate on the Romanian cable market, will amount to several million dollars, but companies will make up for their losses by services tariffs or by a potential sale.
Other three important players, RCS, Metromedia and Kappa, are looking for development opportunities on this market. For the time being, one cannot say what method will be used by each of these companies in order to attract investment funds, but mergers and acquisitions are definitely an option. Ziarul Financiar has recently reported that UPC and RCS were allegedly conducting negotiations in this sense, subsequently denied by officials of the two companies. Investment funds may be raised by capital increases with foreign participation, bank loans or issues of new shares on domestic and international stock exchanges.
In the field of telecommunications, eyes are set on the two mobile telephony operators, MobilRom and MobiFon, whose value increased exponentially over the past four years. Moreover, discussions are currently carried on for a financial arrangement aimed at listing MobiFon shares on the foreign market.
Foreign investors are also interested in information technology, as Euroweb has recently acquired two Internet providers. Moreover, at the end of last year, the Romanian Post-Privatisation Fund (FRPP) took over 40% of PC-NET Data Network S.A shares, in a transaction worth 1.5 million dollars.
"These acquisitions are a positive sign for foreign investors wanting to come on the Romanian market. Romanian companies can only benefit from the market's development, as they acquire increased visibility," says Alexandru Borcea, chairman of the Romanian Association for Electronic Industry and Soft (ARIES).
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