Key trends on the telecoms market in Central and Eastern Europe
According to the latest report “Telecommunications market in Central and Eastern Europe. Forecasts for 2011-2016” published by PMR, a market research company, the total value of the telecommunications services market in the CEE region amounted to approx. €28.3bn in 2010, which represented an increase of just 0.9% year on year. Conversely, in 2004-2008, the telecommunications services market in the CEE witnessed a compound annual growth rate of 7.5%. The market grew relatively quickly, fuelled chiefly by the dynamic development of the Ukrainian and Romanian market. The worldwide economic crisis, together with the regulatory policy aimed at cutting mobile termination rates, negatively influenced the market value in 2009-2010.
The limited rates of growth which have recently characterised the CEE countries are also a consequence of the fact that these markets have become more mature and competitive and have faced constant price erosion, seen in practically every market area. The growth potential of the countries is now based mainly on the development of data transmission and broadband services, which, however, still represent a relatively low percentage of the total revenues from telecommunications services. Additionally, especially fixed broadband in the CEE countries has also seen first serious signs of saturation.
According to PMR calculations in the recent few years, more healthy net additions could be observed actually only on the internet market, and chiefly thanks to dynamically growing subscriber base in Ukraine. There may be observed a constant outflow of fixed-line telephony subscribers, which has been more significant each year since 2006. SIM card base numbers also seem to reach their peak and a further explosive growth is hardly possible. Another sign of market maturity concern the monthly revenue per user indicators which suggest a continual declining tendency. However, the extent of the decline is not impressive, particularly considering the fact that, as market saturation increases, in all market sectors there appear users who only make moderate use of the services offered, and who fail to immediately generate revenue comparable with the market average.
As far as the broadband internet access market is concerned, in actually each of the CEE countries there is a tendency to offer customers higher and higher data transfer speeds: the same price buys a faster connection every year. Moreover, some operators include an option to change their terms in the long-term deals, should the operator introduce a different special offer at a later date.
Another key tendency is the convergence between telecommunications services and multimedia services, as well as the integration of data transmission services with voice services. The gradual switch to wireless transmission is also worth noting. It is a clear trend in both in Western and in Central and Eastern Europe. More and more often, operators undertake to offer their clients full service covering telephone, internet and television. There is an observable tendency for cable TV operators to use the IP network to offer voice services. Another effect of the convergence is an increased interest of mobile operators in the fixed-line market (home zone-based services).
In the area of mobile telephony, a trend worth noting is the steady increase in the importance of non-voice services. Every year, these services constitute a greater proportion of the total revenue of the operators, who have been enriching their offer with new services of this type. Consequently mobile internet, fuelled by the growing penetration of smartphones, has recently become a driving engine of the mobile network revenues. In fact, in all of the CEE countries 3G coverage has been constantly increasing. “First LTE trials have been already conducted in each of the countries and the region has already seen the first commercial retail offer in the LTE network in the third quarter of 2011 by Cyfrowy Polsat (based on the Aero2 group infrastructure)” – comments Pawel Olszynka, a PMR analyst and one of the report authors.
In the coming two years PMR analysts expect that the major telecoms in the CEE will uphold the strategy of increasing the variety of services offered. The target will be firstly aimed at maintaining its current client base and minimise the rotation of the base (churn). Bundles are the strategic tool to meet this target. Hence, the convergence tendency will grow stronger, as will the mutual interdependencies between the sectors of the telecommunications market. Players on the market will reach outside their key activity areas to offer customers more comprehensive solutions. The tendency to utilise telecommunications as a platform to offer other, non-related services, will grow stronger.
It is also worth noting that further actions of the market regulators, particularly with regard to the mobile wholesale market and interconnection rates, have been and potentially remain one of the key determinants of the value of the telecoms market. This is mainly due to the fact that on the mobile telephony market – which is most strongly affected by the regulatory efforts and it also has by far the largest share in the total telecoms revenues – even changes that are small, percentage-wise, often translate into hundreds of millions of euros.
The situation of the data transmission and ISP sector in the CEE may be improved in the coming years by a greater than expected increase in the data transmission and the corporate services market. The last piece of the puzzle is the fixed-line market. There is an increasingly strong trend among the CEE households for substituting fixed lines with mobile services. The fixed-to-mobile substitution has been progressing in recent years at a stronger or lighter rate practically in all of the CEE countries. In our opinion, in the coming two years the value of the fixed-line market will continue to shrink. However, the fall will gradually become gentler, also due to increasing popularity of VoIP.
This press release is based on information contained in the latest PMR report entitled “Telecommunications market in Central and Eastern Europe 2011. Forecasts for 2011-2016” http://www.pmrpublications.com/product/Telecommunications-market-Central-Eastern-Europe-2011
For more information on the report please contact:
tel. /48/ 12 618 90 00
PMR (www.pmrcorporate.com) is a British-American company providing market information, advice and services to international businesses interested in Central and Eastern European countries as well as other emerging markets. PMR's key areas of operation include business publications (through PMR Publications), consultancy (through PMR Consulting) and market research (through PMR Research). Being present on the market since 1995, employing highly skilled staff, offering high international standards in projects and publications, providing one of most frequently visited and top-ranked websites, PMR is one of the largest companies of its type in the region.
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