2006-2007 Eastern European Mobile Communications and Mobile Data Markets

Probably the most uniformly dynamic telecoms sector across the whole Eastern European region, the mobile industry continues to grow despite maturing markets in some regions. In saturated markets the good times of high growth will become to harder to imitate during 2007, with revenue growth to be centred on encouraging migration to postpaid plans and 3G services to offer desirable mobile data and content. Operators have their work cut out for them in the mobile data and contents market as SMS and MMS continues to account for the majority of non-voice revenue although the faster network speeds available due to 3G networks and HSDPA, coupled with the falling cost of sophisticated handsets, should be encouraging for operators as it allows delivery of more desirable high-bandwidth content. The Eastern European annual reports have been designed to offer extensive coverage of the region, highlighting regulatory and market developments, introducing the major players and the services on offer, as well as providing a wealth of insightful statistics and forecasts, no doubt making essential reading for anyone holding an interest in the region’s telecoms sector. Data in the reports are the latest available at the time of preparation and may not be for the current year.

Central Eastern Europe (CEE)

• The Czech Republic now has the highest mobile penetration out of the five CEE countries, a position once long-held by Slovenia.
• MVNO activity should increase in 2007 as analysis of wholesale mobile markets was completed for the Czech Republic, Hungary and Slovakia during 2006. Although this will depend on how rapidly identified SMP operators implement and abide by any obligations placed on them by the regulators.
• Deutsche Telekom has strengthened its presence in the region, following increased ownership of a major Polish network operator, a move which would allow it to offer the T-Mobile brand in the Polish market.
• As mobile penetration in all five countries is at or near saturation, operators are now looking to improve ARPU levels by migrating users to postpaid tariffs and 3G services. However 3G is not all it has shaped up to be, with Vodafone Czech Republic halting the rollout of its 3G network, believing the benefits do not justify the cost.

Baltic

• Mobile subscriber growth in all three countries, despite saturated markets, suggests multiple SIM card ownership. Mobile operators acknowledge there is little room left to grow through new subscriber additions and have been focusing on encouraging postpaid take up among prepaid users as a way to increase ARPU levels. Numerous Mobile Virtual Network Operators (MVNO)s offer services in each country although so far they have made little impact due to the short time they have been offering services.
• Mobile data and content is also being sought to create new revenue growth opportunities. Third generation and HSDPA services are available in each country although widespread usage will be limited for the next two to three years when 3G-capable handsets become more widespread. In the meantime SMS and MMS continue to be the primary mobile data revenue generators. Mobile content available includes streaming mobile TV and mobile music in partnership with record companies. SMS-based mobile commerce (m-commerce) services are available.
• Developments in sophisticated m-commerce services are underway; Lithuania’s largest mobile operators has launched a mobile digital signature offering that is compatible with conventional Public Key Infrastructure (PKI) products and has concluded agreements with certificate authorities to provide electronic certificate services. Agreements have also been concluded with another mobile operator to develop compatible mobile electronic signature infrastructure to promote usability.

Balkans

• Strong growth has been recorded across most mobile markets, although low annual growth rates in Bosnia and Greece suggest saturated markets. With numerous markets approaching maturity, operators are attempting to maintain revenue growth momentum through increasing ARPU levels. Strategies used include encouraging migration to postpaid plans, differentiated tariff plans and encouraging mobile data and content usage.
• 3G will become increasingly important in the near future as the focus shifts to mobile data and content usage. However widespread uptake will be challenged in the short/medium term by the lack of desirable mobile content, lack of awareness/familiarity with mobile content services and penetration of 3G-capable handsets.
• Commercial 3G services launched during 2006 were witnessed in Romania and Bulgaria, with HSDPA services launched in Romania, Bulgaria and Croatia. Romania’s third and fourth UMTS licences were awarded in October 2006, with an established CDMA operator and the country’s second largest cable operator emerging victorious. The mobile arm of the country’s fixed-line incumbent missed out in the beauty pageant-style tender.

CIS

• Third generation mobile licences in Russia moved closer towards reality in October 2006 when the State Radio Frequency Commission announced it would offer an unspecified number of concessions in the 1.935GHz-1.980GHz, 2.010GHz-2.025GHz and 2.125GHz-2.170GHz frequency spectrum bands. MTS and VimpelCom have confirmed their interest in acquiring 3G licences. A temporary operating concession was issued in September 2005 to mobile group Skylink for the launch of trial 3G services.
• Ukraine’s regulator released plans in April 2006 to award a second 3G licence by 2007. The state-owned fixed-line incumbent already holds a 3G licence has plans to launch services by June 2007.
• A number of MVNOs offer services in Russia, including Corbina, Central Telegraph, Matrix Mobile and Megatel. Ukrainian MVNO Privat has gone from gone from strength to strength.
• Mobile penetration levels in all four countries are still growing rapidly despite approaching maturity. Consequently the major Russian mobile operators have expanded internationally in search of new revenue growth opportunities. Despite attempts to expand into Asia, the Middle East and Eastern Europe, most success has been found within the CIS region.
• Mobile data usage in Russia it is expected to account for 20% of mobile revenue during 2006. MMS interoperability was launched in Ukraine in late 2005 while EDGE services were launched in Belarus and Moldova during 2005. However setbacks have been encountered, with MTS acknowledging i-mode has not been as popular as originally anticipated.