Only now is real competition beginning. So far, each competitor had delimited their own geographical areas. “However, the statements of UPC's former president Richard Anderson that RCS&RDS had penetrated the UPC geographical area and consequently UPC would have to go into the RCS&RDS area, show that only now there is real competition,” says telecommunications consultant Nicolae Oaca. In general terms the situation looks like this: the fact that each operator was compelled to leave their original “area of influence” and moreover, the appearance of DTH, which offers a better quality television experience for lower prices will lead to fierce competition, he says.
One of the major players on the market, UPC Romania finished last year with losses in the customer base of one of its core businesses, cable TV. UPC lost 180,000 customers on this segment but the net customer loss was 85,000 since the company gained 30,000 subscribers for digital TV and 65,000 for satellite television. Moreover, it added 60,000 subscribers on the internet segment and 40,000 in landline telephony. The company changed its management in February when Jack Mikaloff was appointed the new president, replacing Anderson.
UPC Romania has a presence in 200 towns and since its entrance on the market it has made investments amounting to EUR 700 million.
One of UPC's main competitors, Romtelecom, plans to improve its internal processes, improve its offer of services in order to increase its customer portfolio and consolidate its position on the market as well as keep rigorous tabs on the costs. “In 2008, we will transform the way in which we run our activity, we will turn towards profitable growth and be a leader on the market as far as the quality of the services we offer is concerned,” said Yorgos Ioannidis, CEO of Romtelecom. The company has announced it may lay off 2,500 of its employees in 2008.
This year Romtelecom is aiming to achieve solid growth on the broadband & data and television via satellite segments. On top of this, it plans to increase the number of customers for fixed- line voice services.
DTH service Dolce was launched at the end of 2006. “Given the success registered by the Dolce service in 2007, we consider IPTV to be an interesting growth opportunity for Romtelecom. We've already announced we will test the service in 2008,” said Ioannidis.
The DTH market reached a total of 1.3 million customers at the end of last year. The figures broken down for each player in the business look like this: Romtelecom has 400,000 subscribers with Dolce, UPC Romania has 115,000, RCS&RDS has at least 600,000 while smaller players like Digital Cable Systems and DTH Television Group each have 100,000 customers.
Last week, Romtelecom launched its first integrated offer of data services for customers in the SME segment in partnership with Fujitsu Siemens Romania and Flamingo.
As part of this offer, corporate customers who wish to subscribe for the ClickNet or iP FIX services offered by the telecom player can also purchase Fujitsu Siemens P250 desktops or Fujitsu Siemens V5515 laptops.
“I think Romtelecom has already started to do the right thing – unfortunately, ten years later than it should have. Both video and telephony services will converge towards the IP. It is amusing that Romtelecom offers a data service and a TV service which top that of competitors who entered the market by offering cable and internet,” says Dragos Manac, lead operations at System and Network Solutions.
An important aspect of competition among the big players on the cable market is the tendency to establish a presence in all the aspects of the telecommunication business, trying to attract cash-ins from the mobile voice segment, either by partnerships with other players who can supply these services – a situation which can be mutually beneficial for both sides (and this is the case of Romtelecom and Cosmote as well as, possibly, UPC and Orange Romania) – or by launching their own mobile data services (as is the case with RCS&RDS which launched its DigiMobil service).
For Romtelecom, the continuation of the collaboration with Cosmote will be a key point in its strategy. This will translate into more joint offers which will also include mobile voice services. Romtelecom expects these plans to consolidate its position on the market in 2008 while the following two years are expected to bring increased profitability.
Recently, UPC also tried its hand at developing a joint offer with Orange Romania offering its triple-play services (landline telephony, internet and television) in the same package as Orange Romania's offer for mobile voice services. This was a test offer launched only in a few cities and discussions between the Orange Romania and UPC management will determine whether it will be a viable solution in the long run.
“The fact that operator RCS RDS has launched itself on the mobile telephony market is an indicator of the fact that RCS&RDS wants to enter into a superior league,” says Oaca. The company's offer is one of the first 4Play packages on the market, since in the areas where RCS&RDS has 3G coverage, it offers a cumulated package of services – cable TV, data, fixed and mobile voice services.
The operators who do not offer quad play services “will lag behind and they will remain third or fourth league operators or even lose this position too.” It is only logical since the customer wants to have the full package. “They want to have everything through the same cable that comes into the house. It is easier to pay just one bill for everything, not to mention the fact that this cumulated bill is lower than if these services were paid for separately,” Oaca says. “It is exactly like a supermarket. Customers prefer to go to a larger shop and put in the basket everything they need for a
week than go to various smaller shops.”
“The typical customer who uses the services of a cable operator started with the television as the basic service. But he or she also needs telephony and internet, and, moreover, minimum complications, and this is why multi-play services have success,” says Manac, adding that if the relationship with the customer is simplified – meaning aspects such as the installation, the use and payment for the service – even an operator who supplies just one service will be able to have access to the market.
On the other hand, mobile operators may possibly beat cable companies at their own game by introducing integrated packages which also include landline telephony and internet.
In conclusion, what will matter and will be the key points of focus from now on will be achieving greater coverage, high-speed internet access, telephony and digital television services on the IP. The satellite will cover those areas in which cable penetration is difficult or economically unviable,” says Manac.
NetCity project triggers fears of a monopoly
One factor that has disrupted the tranquillity of cable operators is the NetCity project – the concession to UTI Systems of the public works installing the metropolitan fiber optic backbone. The project presupposes that the fiber optic infrastructure will be buried underground, thus discarding the current one which uses the poles belonging to Electrica and RATB. The project, in which UTI will invest EUR 202 million, requires that the company installs underground telecommunication networks on 1,350 streets in the first two years since being given the contract and by 2011 it should complete the project on all 5,000 streets in the capital.
This project sparked a great deal of controversy and even triggered the involvement of the European Commission. On the one hand, the Association of Cable Companies (ACC) complained that it will lead to a monopoly for UTI Systems and push cable companies towards bankruptcy. “Initially, the City hall officials said the infrastructure for the fiber optic would not cost more than EUR 35,000 per kilometer. Now it the price has got to EUR 250,000 per km and UTI will have to recuperate the money it will pay to the City Hall from us, the companies which will rent the fiber optic and who will consequently die economically,” ACC president Radu Petric said.
Oaca is positive that the materialization of the NetCity project will have an impact on consumers' pockets since the project involves some supplementary costs for the cable operators.
“While it is true that NetCity offers a greater degree of security since the infrastructure is buried underground, it is also true that the operators' accusations are founded. The regulatory body should regulate the prices that operators will have to pay to rent the pipe,” says Oaca.
Dragos Manac says the implementation of this project may lead to the emergence of smaller players. “The future is in the digital/IP environment and not in wires. NetCity can be the infrastructure for distributing digital content, and its implementation will facilitate the emergence and development of small operators.”
On the other hand, the European Commission expressed its concern over the NetCity project saying that it may affect the free competition on the market. EC Commissioner Viviane Reding said that the Commission would thoroughly analyze the situation, to ensure that Romanian and European competition laws were not broken. “City Halls should not intervene on the market in a way that distorts competition. We want high-speed internet in all European cities, but this must be done in an open way, without any discrimination. Bucharest is often called Little Paris. In this case, Bucharest should follow the Paris model, where several companies in competition share the same network, a fact that generates better service for lower prices,” said the European official, also warning that Brussels would not accept new IT monopolies.
By Otilia Haraga