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On February 25 2010, Telekom Slovenije published its unaudited revenue and earning report for 2009. The headline results were far from positive. Net profit for the period stood at EUR 24.6m, down a staggering 71 percent on the previous year. Earlier that some month, Economy Minister Matej Lahovnik had called for audits into the company's recent acquisitions in Kosovo and Macedonia. By the time March rolled round, bringing with it the resignation of Telekom Slovenije's vice-chairman Dušan Mitič, much of the media had become convinced that there were serious problems at Slovenia's largest telecommunications company.

Logical explanations?

Further study, however, has convinced many that such concerns were perhaps misplaced. Take the resignation of board of directors vice-chairman Dušan Mitič. Many are now arguing that his resignation was not quite as untimely as the majority of the media reported. Although undoubtedly early, it is important to note that his departure was preceded by the appointment of a new chairman. Ivica Kranjčević began his term on March 13 2010 and, as with any company chairman, retains the right to create his own board of directors.

Results

What of the company's dwindling profits then? There are three main explanations: the global financial crisis, new European Union regulations for mobile operators, and tighter market conditions within the telecoms sector. And the credit crunch, arguably the common cold of explanations, cannot be discounted either - it doesn't merely describe drying up revenue streams. In a debt based economy, credit flow is needed, especially during mergers or acquisitions.

While the European Union has been very kind to the consumer with respect to mobile telephony, this kindness has had an inverse effect on the companies providing such services. Year-on-year, new EU regulations further tighten the caps on roaming rates; even the intervals at which customers get charged.

Expansion

Telekom Slovenije has also had to contend with a progressively more saturated market in Slovenia. It is this which has prompted the continued expansion of the group into other South Eastern European markets - something critics argue contributed to the group's poor results in 2009.

But the figures seem to suggest otherwise. The company's most recent acquisitions are Kosovo's Ipko and Macedonia's One (previously Cosmofon). Although these purchases have contributed to the group's net financial debt rising to EUR 590m, both companies are already producing results. Ipko is posting profits; achieving positive earnings before interest, taxes, depreciation and amortization (EBITDA) already two years prior. Similar results are expected to be achieved in Macedonia in the near future.

Why, then, all the furor? Why has Economy Minister Lahovnik demanded audits of the acquisitions? It is worth noting that Telekom had in fact already launched an external audit into One, and an internal audit into Ipko. The reason is simple: the appointment of the new board of directors. Audits are commonplace when executives change. In the words of Telekom Slovenije spokesman Boris Ziherl: "It is a routine procedure to check whether business procedures up till [the change of board] were carried out accurately and transparently, in order to clarify any misunderstandings".

The reports were due to be finished by the end of April and made public. It remains to be seen whether they will be enough to persuade the media that there is life in Telekom Slovenije yet.