TIRANA, Oct. 1 – Greece’s OTE Group, where Deutsche Telekom holds a 40 percent stake, is planning to sell its Telekom Albania unit, the country’s second largest mobile operator with a state-run Serbian mobile operator reported as a frontrunner to acquire the key asset, according to international media reports.

“Serbia’s state-run Telekom Srbija has made an offer to acquire Telekom Albania as it looks to expand in the Balkans. Czech PPF Group and Bulgaria’s Vivacom are also vying to acquire it,” Reuters reports, citing Serbian media.

Turkish and Greek companies are also reportedly interested in acquiring the German-Greek operator, according to government sources quoted by local Albanian media.

The entry to Albania of Telekom Srbija, which also operates in Bosnia and Herzegovina and Montenegro, would mark the first major Serbian investment in Albania, where Serbian investment is quite modest, amid tense political relations over Kosovo, the ethnic-Albanian country which declared its independence from Serbia a decade ago.

Albania and Serbia have been closely working in the past few years to overcome historical barriers that have held back closer economic cooperation and investment, but trade and investment ties have slowly progressed.

Foreign direct investment from Serbia, the region’s largest economy, have in the past three years climbed to a modest stock of €20 million while Albanian investment in Serbia is almost non-existent.

Meanwhile, trade exchanges between the two countries hit a record high of about 30 billion lek (€236 million) in 2017, fuelled by an almost 40 percent increase in Albania’s imports from Serbia, leading to a wider trade gap with Serbia.

Second largest operator

Former AMC Albania was initially launched as a state-run operator in late 1995 as the country’s first mobile operator before it was acquired in 2000 by Greece’s OTE Group and rebranded Telekom Albania in mid-2015.

Telekom Albania is currently the second largest mobile operator in the country with a 36 percent market share, but posted significant losses in 2017 along with leading mobile operator Vodafone Albania.

Telekom Albania and Vodafone Albania each purchased a 50 percent share in Plus Communication operation at the end of 2017 when the sole Albanian-owned mobile operator ceased its operations after seven years of activity, leaving the market with three foreign-owned operators, including Turkish-owned Albtelcom.

Albania’s mobile phone operators suffered a double-digit decline in revenue in 2017 in an ongoing downward trend since almost a decade, triggered by tougher competition and smartphone apps replacing traditional phone calls and text messages, according to the electronic communications watchdog.

Experts worried

Economy experts describe the departure of German giant Deutsche Telekom as a bad signal for the Albanian economy and the country's telecommunications, a key sector also for the country’s national security.

"That is not good news as an international brand which you can take pride in is departing and considering the ones rumored to replace it, that will only be a transaction with no development for the market as the reality will remain unchanged," financial expert Elvin Meka has told a local TV.

The financial expert says the government should reconsider acquiring a minority stake in the telecommunication market also on national security grounds.

"That is an alarm bell that should also serve the Albanian government to reconsider the opportunity of reacquiring even a minority stake in such asset," Meka has told local Top Channel TV.

The Albanian government sold its minority 12.6 percent stake in former AMC for about €48 million in 2009 and currently has a 24 percent stake in Albtelecom landline, mobile and internet provider.

Economy expert Zef Preà§i is even more skeptical of Telekom Albania’s possible acquisition by non-EU investors.

"The increase in the Chinese and Turkish capital and extra pressure on capital of Russian origin or similar countries is in essence testimony to the fatigue that serious EU companies have with the business climate in Albania either with its slow improvement or its deterioration," says Preà§i.

"The company owners are compensated for the company's present market value. But the arrival of a new company means tougher business and lower infrastructure investment which punishes consumers," says Preà§i.

The Albanian government says it has not been officially informally of sale negotiations which will also have to receive its okay and regulators such as the electronic communications and competition watchdogs.

Several major EU and North American investors have left Albania in the past few years with key assets in the air transport, oil, banking and health sector changing hands.