2013 Europe Emerging Markets - Mobile Operators and Investment Strategies

MNOs look to Eastern European markets for investment opportunities

In the decade following the fall of communism the mobile markets in Eastern bloc countries were far less mature than their western counterparts, with poorly developed networks and technologies, and with consumers less savvy with mobile services and their potential as drivers for socio-economic development. This attracted a small number of regional players to invest in Eastern markets, particularly those which already operated in bordering Western countries. Investment has since widened, and Western MNOs, through robust M&A activity, are now in many cases the dominant mobile player. In addition, most MNOs have expanded into the fixed-line markets, developing quad-play services including broadband and IPTV in a bid to reduce customer churn and exploit revenue opportunities from different telecom sectors.

Through such investments and through EC-mandated regulatory measures – in place for a number of years as Eastern and Central European countries have joined the EU, or have become accession-pending – these markets are maturing rapidly. Indeed many of them enjoy higher mobile penetration rates than neighbouring Western countries. In part this is a legacy of poorly maintained and antiquated fixed-line infrastructure which encouraged consumers to adopt mobile telecoms as a substitution and alternative for fixed-telephony. However, in recent years the efforts of a number of MNOs such as TeliaSonera and Telenor, both being at the forefront of data technologies such as Evolved HSPA (HSPA+) and Long-term Evolution (LTE), has meant that markets such as those in the Baltics have developed more mature 4G infrastructure than most others in the region. As such they have become testing grounds for a number of emerging mobile data-based services, including m-commerce and m-payments platforms.

While mobile communications and broadband are driving Europe’s overall telecom sector, there remains a need for further investment in networks and spectrum to address consumer need for bandwidth. Spectrum being finite, other solutions such as micro sites will be required to meet future traffic on networks, even with up to 80% being offloaded onto fixed-line networks. This has resulted in greater pressure for operators to speed up network upgrades as operators and consumers alike focus on mobile data services and the ability of networks to support them. In coming years, subscriber growth, which was for long concentrated in the 3G sector, will morph to the 4G platform, placing further pressure on networks.

The economic climate is also likely to encourage MNOs in these emerging markets share infrastructure, a play which has been favoured by regulators as they make their own national broadband commitments heavily reliant on mobile networks to provide broadband coverage in rural areas.

Data in this report is the latest available at the time of preparation and may not be for the current year.