This year will be a year of “fierce competition” on the telecom market, according to a study by consultancy and audit company Deloitte. “Forecasts in the Telecommunication Field for 2008,” says operators Orange, Vodafone and Cosmote will have to deal with the comeback or entrance of RCS&RDS and Zapp.
Telecom is expected to offer “interesting surprises” this year as “bonds between landline and mobile operators will become tighter. These bonds started to be visible in 2007 but in 2008 they will grow more solid and be promoted more,” says the report. The struggle for a larger customer base will become more acute. “Only a few players will be able to cover both areas – fixed and mobile telephony – without needing an ally,” says Andrei Ionescu, senior manager at Deloitte Romania.
Romania was usually “in tune with the development” as far as the implementation of new telecommunication solutions is concerned, a rhythm which will also continue this year.
Technologically speaking, in Romania the trend will be the same as in Europe – heightened competition. What will make the difference between competitors will be the marketing and PR strategy but also having the best technological support. “Now the customer wants the telecommunication device to be modern and incorporate many functions, whether useful or not, and the provider who can offer all of this will be the winner,” says Ionescu.
The entrance of new competitors RCS&RDS and Zapp will put even more pressure on big operators and the portability of numbers will also lead to the redistribution of a part of the customer base towards the smaller players,” Dragos Manac, lead operations at Systems and Networks Solutions, tells Business Review. “I think we will have mobile internet which will be accessible both from the point of view of the speed and the price and here RCS and Zapp can gain very much,” he added.
New contenders on the 3G market RCS&RDS and Telemobil (Zapp) will soon have to show something for the appealing promises they made concerning the 3G license, said Dan Georgescu, the president of the National Regulatory Authority for Communication and Information Technology (ANRCTI).
Zapp and RCS&RDS were the two operators who were awarded the 3G license in October 2006, to the detriment of Cosmote, whose offer was not strong on geographical and population coverage, particularly since these were the main criteria in the evaluation process.
“At least in the case of RCS&RDS, promises are very generous if we are to compare what Vodafone and Orange have achieved in 3G, and they have had the license for two years,” said Georgescu. RCS&RDS's “extraordinary promises” concerning 3G coverage refer to about 55 percent of the population in over 50 cities while Zapp has proposed to achieve coverage in 19 cities by the end of June. If they do not fulfill their promises, the two operators risk being given substantial fines, of up to EUR 35 million, which is how much the license cost. They could even lose their license.
RCS&RDS got their foot in the door at the end of last year. After getting the 3G license, the company launched the Digimobil service, the new 3G mobile telephony – at first just in Oradea – with a rather aggressive offer. At the beginning of February, RCS&RDS offered 3G in 16 cities including Timisoara, Bucharest, Iasi, Pitesti, Resita, Targu-Mures, Bacau, Satu Mare, Galati, Cluj and Constanta.
After a long period in which not much was heard about its plans, Zapp broke the silence with a change in its shareholding structure and the appointment of Chris Bataillard as CEO of Telemobil. In January, the acquisition of Telemobil by Saudi Oger was finalized. Saudi Oger acquired from Qualcomm Incorporated 50 percent of Qualcomm's participation in Inquam Limited, with Telemobil SA being a subsidiary of Inquam Limited. By late June, Zapp is due to launch its 3G network as well.
Bataillard told BR that the company's objective “was to start with all the major cities and then we will go to the next batch and the next batch. That is the minimum that we will do between now and June, but we have plans to go much faster.” Bucharest will be a focal point for various reasons. “It is the biggest part of our network. I think in Romania about 15-20 percent of the traffic is in Bucharest,” Bataillard added.
In January Zapp announced that Chinese-based company ZTE would be its official partner and supplier of 3G equipment, for expanding the Zapp network of 450MHz and developing the 2100MHz network.
Moreover, suburban and rural areas will also start to be covered with high-data speeds. “This is a major change in what has happened in Romania until now,” Bataillard said, adding that in the next couple of months Zapp will launch a series of new voice and data services, including prepay.
On the segment of leading telecom operators, Orange managed to put more distance between it and Vodafone. Very close to attaining 10 million customers, the operator announced income of EUR 1.2 billion, a 24 percent growth, 1.7 million newly-gained customers, and reaching the threshold of 1 million broadband customers. The key aim will be to offer a complete range of fixed and mobile services. Richard Moat, CEO of Orange Romania, told BR that Orange plans to invest almost EUR 200 million this year in network development, improved products and services and new Orange shops.
Investments in the network will entail improving and extending 3G, 3G+ and HSUPA services. Moreover, depending on the market response, the company will also extend the 3G+ at 7.2 Mbps in more areas of Bucharest and increase the HSDPA/3G/HSUPA coverage in the areas with great business potential across the country, such as the residential and industrial areas around the cities. Orange will also be investing in the expansion of its retail network.
Meanwhile, between February 26 and March 3, Vodafone, Orange's closest competitor, announced modernization works on some of the radio 3G equipment in Bucharest, which the company labeled as “an important stage in the development of the 3G broadband network of Vodafone Romania and in passing to a network based entirely on IP protocol.”
At the end of last year, Vodafone announced in it had extended its 3G broadband services at speeds of up to 3.6 Mbps to 232 locations. “Vodafone registered a constant increase in the number of users of mobile broadband data (…) and we expect this trend to continue next year. As a result, the expansion of the 3G broadband services coverage network is for us an important direction of development. (…) Today, the coverage of the Vodafone 3G broadband services amounts to 40 percent of the Romanian population,” said Liliana Solomon, the CEO of Vodafone Romania.
Since December, Vodafone has introduced 3G broadband services to 10 new cities, thus having a total coverage of 58 cities, plus mountain and seaside resorts and locations close to the capital.
Vodafone plans to focus more on broadband mobile internet for both residential and business customers. “With the success that broadband mobile data had among business customers, we aim to make these services as accessible as possible to residential customers in Romania,” said Solomon.
Elsewhere, just two years after entering the telecom market, Cosmote has acquired a stable position. The firm announced it had surpassed the landmark of 3 million customers, out of which around 17 percent are postpaid. Last year was a peak investment year for Cosmote with about EUR 200 million, and the operator announced it would continue investing in the network and improving coverage. Nikolaos Tsolas, former CEO of Cosmote Romania, told Business Review at the end of last year that the company's immediate target was to be EBITDA positive in 2008 after which company officials estimate it will turn a net profit the following year. A higher penetration on the corporate segment, greater emphasis on the postpaid segment, and attracting new customers, also from the competition, rank high on the list of Cosmote's priorities.
Meanwhile, by the end of this fall, some Romtelecom shares may be floating on the stock exchange. The government approved only last week a decision through which the Ministry of Communications and Information Technology is allowed to launch this year the procedure of listing on the stock exchange a percentage of the share package that the Romanian state holds in Romtelecom.
“Given the investors' major interest in IT&C companies in Central and Eastern Europe, we think the initiation of the process of listing Romtelecom on the stock exchange is welcome. We hope that this year in fall, we will successfully finalize the procedure of listing the shares of the company on a stock exchange,” said Karoly Borbely, the minister of communications and information technology.
The normative act rules that Romtelecom will foot the bill for expenses such as the fees of the law firm hired by the ministry, as well as those for preparing and carrying out the privatization of the company (which includes the remuneration of the evaluation commission and selecting the consultant for the entire activity).
Romtelecom continues to be the leader on the landline market with a market share of approximately 70 percent and maintained its number of customers at about 3 million. The company managed to put an end to the erosion of its customer base for the first time in three years. Last year Romtelecom increased its market share on the segment of television and internet offers for both residential and corporate customers.
The satellite TV service Dolce, with a growth rate among the highest in Europe, increased steadily, reaching almost 400,000 customers and a market share of 8 percent on the pay TV market.
“For 2008, we plan to stabilize, and even increase, the client base for fixed telephony and, also, strive to almost double the number of broadband and TV customers,” Yorgos Ioannidis, CEO of Romtelecom, previously told Business Review. Considering the results of the Dolce service in 2007, Ioannidis says IPTV is an interesting growth opportunity for Romtelecom, and plans to test this service in 2008. “Also, we will focus on giving more consistency to the partnership with Cosmote in order to add mobile telephony services to our offer and we will continue to add more value to our existing services,” says Ioannidis.
In February, Romtelecom launched a new offer which provides free private branch exchanges and free secretariat phone terminals. Ioannidis forecasts this year there will be about a 30 percent growth in the demand for fixed telephony services in the corporate segment for Romtelecom.
By Otilia Haraga