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

Regulatory measures on fibre network access needed to expand FttX deployment

BuddeComm’s annual publication, Slovakia - 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 smaller but more progressive markets. It includes operator data to June 2011.

Slovakia enjoyed strong economic growth after joining the European Union (EU) in mid-2004: from 2004 until 2009 real GDP grew by an average 7.4% while unemployment dropped significantly. With an export-dependent economy, the recent global economic turmoil has hit Slovakia’s exports to its principal trading partners Germany, the Czech Republic and France. It also softened domestic demand for goods due to falling consumer confidence and rising unemployment: the country entered its first recession since independence in 1993. Real GDP contracted 4.8% in 2009 before a recovery in 2010 with an estimated growth at 4%. This is expected to continue in 2011 with estimated growth at 3.8%.

Yet the economic turmoil has not hit telecoms and IT services as much as it has other sectors, such as manufacturing and finance. This is largely due to telecoms and IT services being productivity enablers. In addition, many services (particularly broadband and mobile telephony) are considered essential by most consumers who make use of them, and so for operators there is a guaranteed revenue stream though growth has been stymied by competition and a host of regulatory measures, contributing to lower revenue in both 2009 and 2010. This is expected to continue for 2011 before showing moderate growth in 2012, largely on the back on the developing broadband and mobile telephony sectors.

Economic conditions have also exacerbated funding difficulties for telecoms projects. Total investment in telecom networks fell 3.7% in 2009 to €390 million, including a 26% drop reported by mobile operators (to €133 million).

Broadband services are widely available in Slovakia. A large number of ISPs are active in the market, principally in the DSL sector through LLU on Slovak Telecom’s network, though there are also a number of cable broadband operators serving the main towns. A small number of FttX networks have been built, while wireless broadband via WiMAX networks are complemented by services offered by mobile network operators. The dominant ISP Slovak Telecom, majority-owned by Deutsche Telekom, is pursuing a growth strategy centred on broadband, online services and pay TV. Upgraded networks (with ADSL2+ and DOCSIS3.0 technologies) have enabled providers to introduce bandwidth-intensive applications and services: bundled offers based on these services will be a key growth area in coming years. Such applications also increase the potential value of existing fixed-line subscriptions for subscribers who may otherwise cancel fixed-line services for mobile-only solutions.

The mobile market is a triopoly of the MNOs T-Mobile Slovensko, Orange Slovensko and Telefonica 02. High voice penetration is indicative of multiple SIM card use. New revenue growth opportunities for all three operators lie in mobile broadband, given the low mobile broadband penetration levels at present. Hence competitively-priced mobile broadband access services have been launched, often bundling generous prepaid data plans. LTE services, trialled during 2011, will complement commercial HSPA services by the end of 2012.

Key telecom parameters – 2010; 2012

(Source: BuddeComm)

Market Highlights

• All MNOs were issued trial licences in mid-2011 to test LTE in the 2.6GHz band. Previously, T-Mobile Slovensko had relied on test results from Deutsche Telekom for its LTE research and planning. Commercial services are expected by the end of 2012.
• Investment in HSPA technology has continued strongly: Orange Slovakia upgraded 50 base stations for HSPA+ in early 2011 and planned to upgrade the entire network by the end of the year. T-Mobile also expected to launch DC-HSPA+ by the end of 2011, providing theoretical speeds of up to 42.2Mb/s.
• DTTV has been slow to develop a strong viewer base, partly the result of there being only two new channels on the platform which are not duplicated in analogue. There is no HD or sports channel, usually among the first to be launched. Nevertheless, a digital information campaign, started in early 2011, has focussed on DTT to develop consumer interest.
• In late 2011 the regulator called for tenders to make use of additional frequencies for a fourth DTTV multiplex.
• Approximately 40% of TV households subscribe to CATV services. The market is dominated by UPC, which has a digital offering including about 70 channels.
• By early 2011 alternative operators had about 110,000 FttX subscribers. FttH projects are generally municipal or small-scale private networks, though some operators offer FttB services on a national level, such as SANET connecting university buildings, schools and local government offices and Railways Telecom connecting buildings located near railway lines. The FttX sector requires further regulatory involvement to provide clarity on access to infrastructure before it can expand beyond its current limited scale.

This report is essential reading for those needing high level strategic information and objective analysis on the telecom sector in Slovakia. 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 in 2010;
• 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.