2011 Estonia - Telecoms, IP Networks, Digital Media and Forecasts

Estonia’s fibre broadband on target for 2015 national rollout

BuddeComm’s annual publication, Estonia - Telecoms, IP Networks, Digital Media and Forecasts, provides a comprehensive overview of the trends and developments in the telecommunications and digital media markets in one of Eastern Europe’s more mature and dynamic markets.

The Estonian telecoms market is one of the most developed in Eastern Europe. Following independence in 1989 the country moved quickly to open its markets to competition. Estonia was one of ten countries that joined the European Union in mid-2004, and consequently it transposed the EU’s telecoms regulatory framework into national law. At the beginning of 2011 the country adopted the troubled Euro as its currency. This achievement has brought a small country of fewer than 1.3 million people into Europe’s huge single market, and despite existing currency difficulties it should go far to offering a reassuring degree of financial security. Estonia is a justified entrant to the Eurozone, having one of the lowest levels of national debt in the region, just 10% of GDP.

EU membership placed significant regulatory commitments on Estonia pertaining to access and competition rules, which have encouraged investment in the telecoms sector. Indeed Estonia was the first of the Baltic nations to liberalise its telecoms market after ending fixed-line incumbent Elion’s monopoly at the beginning of 2001. All other services had previously been liberalised. Elion has retained a major share of the fixed voice market although it is in decline as consumers turn to mobile handsets to make voice calls and other forms of communication.

Estonia’s broadband penetration is the highest of all the Eastern European countries. Broadband access is available via ADSL2+, FttH, cable, WiFi, WiMAX and mobile. Elion is the dominant provider of ADSL services, with cable broadband the main competing platform. Widespread broadband usage has underpinned Estonia’s emerging internet economy, with various e-commerce, e-government, e-education and e-health services available and widely used. The cable TV market is well developed and hence cable TV operators have been well-positioned to offer triple play services. IPTV services have been launched by Elion.

Fixed broadband is widely accessible in Estonia, with a number of operators offering services. Strong infrastructure-based competition exists in urban areas, while competition in rural areas is improving mainly due to wireless fixed-broadband access platforms. The market is dominated by Elion, though competition has seen its market share fall from 55% in early 2008 to about 50% in early 2011.

Government participation in expanding broadband access is evident in a number of key programmes which will extend broadband availability to across the county by 2015, in some cases by infrastructure being deployed by private operators through public sector procurement. The main goal is to eliminate the digital divide between cities and rural areas, and to contribute to economic growth. The end-target is for all households and businesses to be able to connect to a network supporting 100Mb/s. Public subsidies are derived from State contributions as well as financing from EU structural funds.

Estonia’s mobile market also enjoys high penetration, approaching 130%. Three mobile network operators offer services, with the main operator, supported by ZTE, also planning to launch 3G services. UMTS networks have been launched, a good proportion of which have been upgraded to support HSPA technology. Given the experience of two mobile network operators – Tele2 and Elisa – elsewhere in Scandinavia, there is the technological and financial backing to propel Estonia to the forefront of the emerging mobile broadband market in the region, and for operators and consumers alike to exploit mobile content and applications. With revenue growth prospects from mobile voice fading, this area is expected to underpin future revenue growth.

Key telecom parameters – 2009; 2012

(Source: BuddeComm)

Market highlights:

• The number of PSTN lines, and traffic, are expected to continue to fall during the next few years as consumers migrate to VoIP and mobile solutions. Recognising growth opportunities from the broadband market as well as the growing market demand for access to information, services and entertainment, the incumbent Eesti Telekom has shifted its focus to selling broadband subscriptions and providing IT infrastructure on which these other services can develop.
• Despite regulated measures to increase competition in the fixed-line broadband market through local loop unbundling, the facility has a poor uptake, with only a few alternative operators using unbundled loops to offer services – most have opted to deploy proprietary infrastructure. By early 2011 there remained fewer than 10,000 fully unbundled lines.
• The three 3G licences awarded in 2003 were complemented by a fourth in late 2006. The recipient, Bravocom Mobiil, is 25% owned by ZTE which has the financial and technological clout to build an effective competing network nationally. The company’s involvement, as also the backing of Tele2 and Elisa for two of the three mobile network operators, will help secure HSA and LTE networks across Estonia during the next few years.
• FttH networks have thus far been focused on greenfield sites or apartment complexes due to the cost of installing new cable. Elion’s network is being extended across major cities. The government’s support of a nationwide FttX network, providing 100Mb/s broadband access for 90% of the population by 2012 and 100% by 2015, is being developed by an independent entity comprised of all major telcos. The State’s EEK1 billion contribution to the project in rural and underserved areas is among the more ambitious, proportionately, in the EU.

This report is essential reading for those needing high level strategic information and objective analysis on the telecom sector in Estonia. It provides further information on:

• Market liberalisation and regulatory issues;
• The impact of the global economic crisis;
• Telecoms operators – privatisation, acquisitions, new licences;
• Mobile data market developments in coming years in light of spectrum auctions and new license awards;
• 3G developments, regulatory issues and technologies including HSPA;
• Broadband migration to an FttH architecture;
• Historical and current subscriber statistics and forecasts;
• ARPU statistics and forecasts.

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