2009 Slovakia - Telecoms, Mobile, Broadband and Forecasts

Defined as an upper middle-income country by the World Bank, Slovakia has enjoyed strong economic growth since joining the European Union in May 2004; from 2004 until 2009 real GDP grew by an average 7.4% while unemployment dropped by 8.5%. An export-dependent economy, the recent global economic turmoil has hit Slovakia’s exports, which counts Germany, Czech Republic and France as its principal trading partners, as well as softening demand at home due to falling confidence and employment, with the country entering its first recession since independence in 1993. GDP is expected to contract by 2.6% for the whole of 2009.

Despite the difficult conditions Slovakia’s telecoms market is expected to fare well given the essential nature of most telecom services. Competing telecom operators have noted that the recent global economic turmoil has not hit telecoms and IT services as much as other industries, such as manufacturing and finance, given that telecoms and IT services are productivity enablers. However it has increased the difficulty in securing financial funding for telecoms projects. During 2008 the telecoms market generated SKK69.2 billion in revenue, a 3.7% annual increase, with the mobile market driving growth. Competition led to flat consumer prices for telecom services during 2008, with a similar trend expected during 2009.

Despite market liberalisation telecoms incumbent Slovak Telecom holds a near monopoly of the fixed-line services market with over 90% share of the fixed telephony market. A number of alternative operators have entered the market although tough competitive pressures have forced a number of mergers and acquisitions, resulting in small number of larger alternative operators. Fixed-line penetration has gradually fallen, a trend primarily attributed to users cancelling fixed lines in preference for using mobile phones.

Slovakia’s Internet market is undergoing a transition as users migrate from narrowband to broadband access platforms due to increasing affordability of cable, ADSL2+, fibre access and wireless broadband. Broadband is being sold as a platform through which telecom operators hope to sell additional services, such as broadband TV (IPTV), in addition to slowing the fall of fixed lines. Riding on this trend is development of Slovakia’s Internet economy, which has received substantial EU funding to develop and improve access to e-government services. Digital terrestrial TV developments are underway, with three multiplexes to be launched by 2013.

Slovakia’s mobile market is serviced by three mobile network operators with penetration levels indicating multiple SIM card ownership. A relatively new market entrant and introduction of mobile number portability has increased competition. Both of the established mobile network operators have focused on improving ARPU levels by encouraging existing prepaid users to migrate to postpaid plans, as well as offering mobile broadband access and content services, which have benefited from deployments of 3G/HSDPA networks. With competition increasing one of the two established operators has embarked on a plan to become an integrated telecoms services provider.

Key highlights:

·         Broadband represents the majority of Internet subscriptions, with DSL the broadband platform of choice although its dominance is fading as other platforms gain prominence; fibre is expected to play a greater role in future broadband access given a string of FTTx platforms deployments, including a extensive deployment by mobile operator Orange with over 280,000 households passed in three years, representing over 10% of Slovakia’s total households. Slovak Telecom has embarked on a similar project, with over 200,000 households already passed.

·         Building on greater broadband penetration and internet usage is development of online applications and services that form the Internet society; an e-government development strategy until 2013 has been approved and a project is underway to define an integrated IT architecture for the public administration to support delivery of e-government services.

·         Slovakian e-health developments are guided by a government approved e-health national strategy for 2009-2013. One of its key strategic goals is to establish ICT infrastructure within Slovakia’s health care sector, including introduction of an e-health smart card, which should be assisted by the fact that computerisation rates among general practitioners is above the EU27 average.

·         Digital TV availability is expanding following the a successful tender to select a digital terrestrial TV multiplex operator in August 2009. The successful bidder plans to launch the first multiplex in early 2010, broadcasting using both the MPEG-2 and MPEG-4 standard. Digital TV in standard definition and high definition is already widely available via IPTV, cable and satellite.

·         Competition is shaking up a previously cosy duopoly in the mobile market; incumbent operators T-Mobile and Orange and both focused on retaining existing subscribers and fostering loyalty while new market entrant Telefónica 02 has aggressively acquired subscribers through price competition.

·         Mobile broadband represents a new revenue growth opportunity for all three mobile networks, given existing low mobile broadband penetration. Competitively-priced mobile broadband access services have been launched, bundling generous prepaid amounts of data.

Slovakia – key telecom parameters – 2008 - 2009

(Source: BuddeComm based on industry data)

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

The following notes provide some background to our scenario forecasting methodology:

·         This report includes what we term scenario forecasts. By describing long-range scenarios we identify a band within which we expect market growth to occur. The associated text describes what we see as the most likely growth trend within this band.

·         The projections shown in the tables in this report are based on our own historical information, as well as on telecommunication sector statistics from official and non-official, national and international sources. We assume a possible deviation of 15-20% around this data.

·         All statistics for GDP, revenue, etc are shown in US$, in order to maintain consistency within and between markets. At the same time we acknowledge that this can introduce some irregularities.