Telecom market embraces brave new digital world

Data from the National Authority for Management and Regulation in Communications of Romania (ANCOM) points to a market contraction of around 20 percent in 2009 compared to its value in 2008, approaching EUR 4 billion, according to Catalin Marinescu, president of ANCOM. Two years ago, the value was approximately EUR 5 billion, up 10 percent from EUR 4.61 billion in 2007.

ANCOM foresees a return to growth in 2010, since even in 2009 certain segments underwent an upswing. Moreover, Marinescu says the industry made the strategic changes last year that will ensure it gets back on track this year. In the first half of 2009, broadband connections at active mobile points increased by 59 percent, reaching 2.4 million on June 30, 2009, compared to 1.5 million at the end of 2008.

Given the 100 percent or higher rate of mobile internet adoption over the last two years, the entry of new operators as well as the appearance of package offers, IDC expects the number of mobile internet clients to hike by 60-70 percent in 2010.

“Operators will probably opt for the expansion of fixed and mobile data and will look to high-speed internet. Investments will also go into the migration of networks towards IP. Some operators will budget investments in digital television networks while others see a source of revenues in IT services and will seek to develop special IT departments without sub-contracting this type of service to traditional suppliers,” says Madalin Lazarescu, research manager at IDC Romania.

IDC puts the value of the telecom market at USD 4.95 billion in 2009, while in 2010 it is likely to reach USD 5.20 billion. The market research firm’s predictions were made at the currency exchange level of RON 2.53/USD in 2008. The depreciation of the RON that followed after the start of the recession will have a negative impact of approximately 21 percent on the 2009 value, with the depreciation in 2009 being similar to 2008.

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Technological changes and the economic outlook are the key drivers for this year’s trends in telecommunications, according to the latest telecommunications predictions report issued by Deloitte.

“With an accelerated adoption of mobile broadband, the entire telecom industry, from equipment makers and carriers to consumers and even regulators, is trying to cope. As a result, the market is now filtering the best business approaches from both a provider and a client’s point of view, looking for the right balance between costs and benefits,” says Ahmed Hassan, partner with Deloitte Balkans.

This will be a year when Romanian 3G developments will be interesting to follow, says Andrei Ionescu, ERS senior manager at Deloitte Romania. “To some extent, we identify the global industry trends within new local consumption patterns: while getting carried away by new, sophisticated technologies like smartphones, mobile broadband and social networks, consumers are expressing higher expectations for service quality and advantageous paying schemes,” he adds. From a service provider’s point of view, fierce competition and a tough business environment make innovation, flexibility and the ability to reinvent oneself key differentiators on the market, Ionescu goes on.

Getting its priorities straight

One of ANCOM’s priorities this year is to achieve the first stages of transition from terrestrial analog television to terrestrial digital television. ANCOM will also re-organize frequency wavelengths for last generation mobile communication systems. “We have the opportunity to supply 3G services in the wavelengths where only 2G services, specific to GSM services, are currently supplied. Then, we are taking the first steps in introducing 4G services in Romania. All these measures are meant to encourage the use of broadband internet by Romanian users,” says Marinescu. The regulator has drafted a new strategy to introduce three new wavelengths: broadband wireless access in the frequency wavelengths 3.5 GHz, 2.5 GHz and 800 MHz. The 3.5 GHz band is already being used for point-to-multipoint communications while the 2.5 GHz wavelength is still reserved for government use but will be offered to mobile communication suppliers once it is cleared.

“We believe the 3.5 GHz wavelength is the most appropriate for supplying WIMAX services, while the 800 MHz wavelength can be used for next generation broadband services: 4G- LTE,” says Marinescu. The 800 MHz wavelength, which will be cleared once the complete transition to digital television is made, will be used for mobile services. “The better propagation of this wavelength obviously leads to lower costs both for suppliers and users,” he adds. As far as the 2.5 GHz wavelength is concerned, it will probably be used both for WIMAX technology and for 4G. “For users, this would translate into access to new services, quicker internet access and lower tariffs due to competition on the market,” says the authority president.

A new campaign on the portability of numbers will take place in Q2 and Q3, 2010. Between October 2008 and January 2010, just over 200,000 numbers were transferred to other networks, of which 132,600 were mobile numbers. Some 75 percent of the mobile users were postpay customers while 25 percent were prepay.

Last year, ANCOM started working on a portal that will allow users to compare tariffs, having applied for financing from structural funds last October. The authority hopes the project will be available to users in 2011.

In the first half of the year, ANCOM will also start consultations on the calculation of the costs of call-ending services. In the second half of 2010, the consultant that will help the authority realize the model of cost calculation will be selected. However, the plan is that this complex project should be completed in the first half of 2011, said Marinescu. This will lead to fiercer competition and an upsurge in the consumption of call services as off-net calls will become cheaper, similar to in-net call prices. “The decrease in inter-connection tariffs will have a rather small impact on operators’ revenues given that the bulk of traffic for each operator takes place within the network. I would estimate that it could be somewhere around 5 percent of the total revenues, depending on the traffic specifics of each operator,” says Lazarescu.