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

Tender for LTE licences in 2012 a key step to developing mobile broadband

BuddeComm’s biannual publication, Romania - 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 prominent emerging markets. It includes the regulator’s market report to June 2011, operator data to the end of 2011 and market developments into 2012.

One of the newest members of the European Union (EU), Romania experienced rapid economic growth in the years leading to and immediately after EU ascension. This growth was halted by the global financial crisis: real GDP contracted by 7.1% during 2009, though economic recovery was evidenced during 2011 and IMF anticipated growth of 2% for 2012, which remains higher than the EU average.

Continuing economic difficulties and the necessity to impose unpopular measures (including increases in the sales tax and a sharp reduction in public workers’ salaries) led to the resignation of the Romanian Prime Minister and cabinet in early 2012. The new Prime Minister, heading a Democrat Liberals government widely seen as corrupt, pledged to continue with economic reforms, though these may be undermined if a new government is formed after the November 2012 elections.

These difficulties have affected the telecoms sector, where revenue has fallen steadily in recent quarters. This has been mirrored by lower investment in the sector.

Nevertheless, on a general level EU accession has led to a liberalised fixed-line market which has encouraged competition. The regulator has also imposed a number of measures, in both the fixed-line and mobile sectors, to reduce interconnection rates and so lower prices for consumers.

There remain considerable growth opportunities in the broadband sector, mainly due to the poor infrastructure in rural areas and relatively low PC penetration. The number of Romanians which have never used the internet is far higher than the European average. To address poor broadband connectivity the government planned, by 2015, to extend broadband services to 90% of the estimated 3,600 broadband ‘white spaces’. Funding is being provided from public sources as also from the EU which has contributed some €84 million thus far.

Romania’s competitive mobile market is served by MNOs utilising a mixture of 2G and 3G technologies, while investment is continuing to upgrade networks with LTE and HSPA+. The tender for four LTE licences in the second half of 2012 will be a crucial step to enabling Romania’s MNOs to develop mobile broadband. The concessions for the use of frequencies in the 800MHz, 900MHz and 2600MHz bands will provide some diversity for operators to extend networks in both rural and urban environments.

Key telecom parameters – 2010; 2012

(Source: BuddeComm)

Market Highlights

• The underdeveloped mobile content and applications market holds significant growth potential in coming years: mobile content and application usage is low, while increasing mobile broadband affordability and improving handset and network capabilities will encourage development and uptake.
• RCS&RDS has upgraded its mobile broadband network in a number of cities, and is expected to expand its network to rural areas during the next few years.
• The regulator’s proposals for awarding licences in the 2500-2690MHz and 790-862MHz bands should lead to rights to use spectrum in late 2012, with operators able to deploy services from early 2013. The move will greatly improve rural broadband availability given the poor fixed-line infrastructure in these areas.
• RomTelecom’s steady fall in revenue since has placed further pressure on the company to reduce its workforce, improve operations and increase efficiency. The company has successfully reduced operating expenses since 2010 though competition from RCS&RDS and UPC Romania will continue to threaten its market share in most sectors.
• CATV remains the most popular broadcasting platform in Romania. Although programming is offered by over 500 providers, the market is dominated by UPC Romania and RCS&RDS, which represent over 60% of total CATV subscribers. The number of subscribers has fallen steadily since 2008, threatening future revenue.
• In the DTTV sector, ASO was set back to 2015 but during 2011 the Audiovisual Council has progressed with issuing digital TV licenses: the first multiplex will be granted by the end of 2012, the next three in 2013 and the last in late 2015 once analogue broadcasting has stopped.

This report is essential reading for those needing high level strategic information and objective analysis on the telecom sector in Romania. 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 and LTE;
• 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.