M k t A l i d SMPM k t A l i d SMPMarket Analysis and SMP Market Analysis and SMP designation in Albaniadesignation in Albaniadesignation in Albaniadesignation in Albania

Hydajet KOPANIHydajet KOPANIBoard Chairman/Executive Director Board Chairman/Executive Director Altin RAPAJAltin RAPAJAltin RAPAJAltin RAPAJDirector of Market RegulationDirector of Market RegulationTelecommunications Regulatory Entity Of AlbaniaTelecommunications Regulatory Entity Of Albania

11TAIEX Workshop, Belgrade 4-5th October, 2007

Content:Content:Content:Content:

Legislation and TRELegislation and TRELegislation and TRELegislation and TRESector overviewSector overviewL l B i d d f SMPL l B i d d f SMPLegal Basis and procedures for SMP Legal Basis and procedures for SMP Designation Designation Mobile SMP designationMobile SMP designationFixed SMP designationFixed SMP designationggMain issuesMain issues

22

Legislation and TRELegislation and TRELegislation and TRELegislation and TRETelecommunication sector is governed by Law No. 8618 of June 14, Telecommunication sector is governed by Law No. 8618 of June 14, 2000 “2000 “On Telecommunications in the Republic of Albania” (based onOn Telecommunications in the Republic of Albania” (based on2000 2000 On Telecommunications in the Republic of Albania (based on On Telecommunications in the Republic of Albania (based on 1998 EC Directives).1998 EC Directives).

Sector policy objectives are defined by Decision No. 288 of Council Sector policy objectives are defined by Decision No. 288 of Council p y j yp y j yOf Ministers, June 18, 1999: Of Ministers, June 18, 1999: “Development Policy Document of “Development Policy Document of Telecommunication Sector in the Republic of AlbaniaTelecommunication Sector in the Republic of Albania”.”.

Telecommunications Regulatory Entity (TRE) is a publicTelecommunications Regulatory Entity (TRE) is a publicTelecommunications Regulatory Entity (TRE) is a public Telecommunications Regulatory Entity (TRE) is a public independent legal entity and its status is defined by Article 8 of Law independent legal entity and its status is defined by Article 8 of Law “On Telecommunications in the Republic of Albania”: “On Telecommunications in the Republic of Albania”:

“Telecommunications Regulatory Entity (TRE) is the regulatory “Telecommunications Regulatory Entity (TRE) is the regulatory th it th t it th l t f k f thi l dth it th t it th l t f k f thi l dauthority that monitors the regulatory framework of this law and authority that monitors the regulatory framework of this law and

of the policy objectives defined by the Council of Ministers”of the policy objectives defined by the Council of Ministers”

33

TRE duties:TRE duties:Regulates the interconnection of telecommunication Regulates the interconnection of telecommunication networks;networks;

Ensures that competition between telecommunication Ensures that competition between telecommunication operators follow the principles of transparency, nonoperators follow the principles of transparency, non--p p p p y,p p p p y,discrimination and fairness;discrimination and fairness;

Safeguard the interests of users of telecommunicationsSafeguard the interests of users of telecommunicationsSafeguard the interests of users of telecommunications Safeguard the interests of users of telecommunications networks and services from operator’s unfair practices;networks and services from operator’s unfair practices;

Supervise the compliance of tariffs of public Supervise the compliance of tariffs of public telecommunications operators with requirements of the telecommunications operators with requirements of the law.law.

44

Sector overviewSector overview: Mobile: MobileSector overviewSector overview: Mobile: Mobile3 licensed GSM Mobile Network Operators3 licensed GSM Mobile Network OperatorsJ 1996J 1996 th fi t bil t Alb i M bilth fi t bil t Alb i M bilJune 1996June 1996: the first mobile operator, Albanian Mobile : the first mobile operator, Albanian Mobile Communications (AMC) launched its services as 100% Communications (AMC) launched its services as 100% government owned company;government owned company;September 2000September 2000 pri ati ation of 85% of AMCpri ati ation of 85% of AMCSeptember 2000September 2000: privatization of 85% of AMC : privatization of 85% of AMC completed (sold to CosmOTE (mobile operator in completed (sold to CosmOTE (mobile operator in Greece, part of the fixed Greek incumbent OTE);Greece, part of the fixed Greek incumbent OTE);June 2001:June 2001: the second license for GSM operator issuedthe second license for GSM operator issuedJune 2001:June 2001: the second license for GSM operator issued the second license for GSM operator issued to Vodafone Albania (launch of services August 2001); to Vodafone Albania (launch of services August 2001); March 2004March 2004: the third mobile license issued to Eagle : the third mobile license issued to Eagle Mobile a subsidiary of fixed incumbent operatorMobile a subsidiary of fixed incumbent operatorMobile a subsidiary of fixed incumbent operator Mobile a subsidiary of fixed incumbent operator Albtelecom. The license given as part of the privatization Albtelecom. The license given as part of the privatization package. Due to delayed process of privatization this package. Due to delayed process of privatization this operator still not active.operator still not active.

55

operator still not active. operator still not active.

Sector overview:Sector overview: MobileMobile contcontSector overview: Sector overview: MobileMobile cont.cont.

Very high growth rate from 2001.Very high growth rate from 2001.Very high growth rate from 2001.Very high growth rate from 2001.

As of end June 2007: 2 1 million usersAs of end June 2007: 2 1 million usersAs of end June 2007: 2.1 million users, As of end June 2007: 2.1 million users, 66% penetration rate. 66% penetration rate.

96% prepaid customers96% prepaid customers

No MVNO, ESP/SP. No MVNO, ESP/SP.

66

Sector overview: fixedSector overview: fixed

Network operators as of end 2006: Network operators as of end 2006: O ti l fi d t k t (i b tO ti l fi d t k t (i b tOne national fixed network operator (incumbent One national fixed network operator (incumbent operator Albtelecom);operator Albtelecom);55 small rural (local/regional) network operators55 small rural (local/regional) network operators55 small rural (local/regional) network operators55 small rural (local/regional) network operators

2000 2000 -- 2006: alternative fixed network operators licensed 2006: alternative fixed network operators licensed only for rural areas; only for rural areas; November 2006/April 2007: alternative fixed network November 2006/April 2007: alternative fixed network operators may be licensed for up to three regions operators may be licensed for up to three regions (including urban areas);(including urban areas);(including urban areas); (including urban areas); July 2007: Privatization of 76% of Albtelecom completed.July 2007: Privatization of 76% of Albtelecom completed.

77

Sector overview: fixed contSector overview: fixed contSector overview: fixed cont.Sector overview: fixed cont.

Very slow growth rate and long waiting listVery slow growth rate and long waiting listVery slow growth rate and long waiting list Very slow growth rate and long waiting list for the incumbent operator;for the incumbent operator;As of end June 2007: 290 000 users 9 3%As of end June 2007: 290 000 users 9 3%As of end June 2007: 290,000 users, 9.3% As of end June 2007: 290,000 users, 9.3% penetration rate.penetration rate.R l t l 30 000 i 9%R l t l 30 000 i 9%Rural operators only 30,000 users i.e. 9% Rural operators only 30,000 users i.e. 9% market share of the fixed line subscribers;market share of the fixed line subscribers;Penetration rate and waiting list varies by Penetration rate and waiting list varies by districtdistrict

88

Fixed and Mobile UsersFixed and Mobile UsersFixed and Mobile Users Fixed and Mobile Users Numri i perdoruesve te telefonise fikse dhe celulare

Fixed Mobile

2005

2006

Fixed Mobile

2003

2004

2005

ar

2001

2002

2003

Yea

0 200 400 600 800 1000 1200 1400 1600 1800 2000

2000

2001

99

Users ('000)

Penetration of fixed and mobile services 2006

Penetrimi per 100 banore 1 Korrik 2006

100

Fiks Celulare

70

80

90

100

BE 25

BE 25 Celulare

40

50

60

70 BE 25 Fiks

10

20

30

0

Shqipe

ria 1.

01.20

07Bos

nia&Herc

egov

ina

Bullga

ria

Croatia

Ruman

ia

Mali i Z

i

Serbia

Kosov

a

Maqed

onia

Turqia

1010

Sh

Bo

Market size in terms of turnoverMarket size in terms of turnoverMarket size in terms of turnover Market size in terms of turnover

2006: 430 million Euro (6% of GDP)2006: 430 million Euro (6% of GDP)2006: 430 million Euro (6% of GDP)2006: 430 million Euro (6% of GDP)

Hi h t th t bil t 15%Hi h t th t bil t 15%Highest growth rate: mobile operators 15%Highest growth rate: mobile operators 15%

Albtelecom: Albtelecom: --10% (2005: 2.5%)10% (2005: 2.5%)

Rural operators revenues: insignificantRural operators revenues: insignificant

1111

Revenue Market SharesRevenue Market SharesRevenue Market SharesRevenue Market SharesPjeset e Tregut ne te Ardhura

Albtelekom Rural AMC Vodafone

2006

Albtelekom Rural AMC Vodafone

2005

2004

2003

1212

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

SMP designation: Legal BasisSMP designation: Legal Basis

Article 17 of Law On Telecommunications on SMPArticle 17 of Law On Telecommunications on SMP

g gg g

Article 17 of Law On Telecommunications on SMP Article 17 of Law On Telecommunications on SMP Designation (Designation (acquis EC 1998)acquis EC 1998)::TRE determines whether an organisation is an Organisation with SMP. .. TRE determines whether an organisation is an Organisation with SMP. .. when it has a share of more than 25% of the market market share ofwhen it has a share of more than 25% of the market market share ofwhen it has a share of more than 25% of the market …market share of when it has a share of more than 25% of the market …market share of less than 25% in the less than 25% in the relevant marketrelevant market has significant market power. .. has significant market power. .. more than 25% in the more than 25% in the relevant marketrelevant market does not have significant market does not have significant market power. In either case, TRE takes into account the organisation's ability to power. In either case, TRE takes into account the organisation's ability to Influence market conditions …Incomes …means of access to terminal Influence market conditions …Incomes …means of access to terminal users, and experience ….users, and experience ….

“Regulation for SMP designation” approved by TRE “Regulation for SMP designation” approved by TRE Board on 16Board on 16thth of September 2005. of September 2005.

1313

Regulation for SMP designationRegulation for SMP designationRegulation for SMP designationRegulation for SMP designationProcedure and criteria to be used for SMP designation Procedure and criteria to be used for SMP designation

SMP designation: market analysis of the relevant marketSMP designation: market analysis of the relevant market

Procedure: Procedure: TRE publishes Market Analysis for public consultationTRE publishes Market Analysis for public consultationAfter the consultation (normally 1 month) period TRE After the consultation (normally 1 month) period TRE ( y ) p( y ) pprepares the Final Market Analysis, that includes prepares the Final Market Analysis, that includes answers to the comments; answers to the comments; TRE decisions on SMP designation are taken based TRE decisions on SMP designation are taken based ggon Final Market Analysis; on Final Market Analysis; Operators have the Right to appeal against the SMP Operators have the Right to appeal against the SMP decision as defined by the Code of Administrative decision as defined by the Code of Administrative

1414

yyProcedure.Procedure.

Regulation for SMP designation cont.Regulation for SMP designation cont.Regulation for SMP designation cont.Regulation for SMP designation cont.

Market AnalysisMarket Analysis::Market AnalysisMarket Analysis::I.I. Definition of the Relevant Market:Definition of the Relevant Market:

I.I. “Relevant Market” means the market of products, which are “Relevant Market” means the market of products, which are t ll i t h bl f th i t f i f tht ll i t h bl f th i t f i f thmutually interchangeable from the point of view of the mutually interchangeable from the point of view of the

consumer related to its characteristics, price and their intended consumer related to its characteristics, price and their intended use in the area, and which are supplied and demanded by the use in the area, and which are supplied and demanded by the undertakings concerned in a geographic area where theundertakings concerned in a geographic area where theundertakings concerned in a geographic area where the undertakings concerned in a geographic area where the competition conditions are sufficiently homogenous and which competition conditions are sufficiently homogenous and which can be clearly distinguished from neighboring areas can be clearly distinguished from neighboring areas (Law no. (Law no. 9121, date 28.07.2003 “On Competition Protection9121, date 28.07.2003 “On Competition Protection”)”)

II.II. HM test: demand and supply side substitutesHM test: demand and supply side substitutesIII.III. Common pricing ConstraintCommon pricing Constraint

1515

Market AnalysisMarket AnalysisMarket AnalysisMarket AnalysisII.II. SMP analysis of the market defined in step ISMP analysis of the market defined in step Iy py p

Assessment of competition and identification of competition Assessment of competition and identification of competition problems using problems using criteriacriteria that take into account the 2002 EC that take into account the 2002 EC directives and recommendations: directives and recommendations: -- market structure: market shares (dynamic and measured in market structure: market shares (dynamic and measured in volume and revenue), entry barriers, potential competitionvolume and revenue), entry barriers, potential competition-- supplier behavior in terms of price competition and supplier behavior in terms of price competition and

fit bilit t ili b ifit bilit t ili b iprofitability, countervailing buying power, profitability, countervailing buying power, -- consumer benefits, etc.consumer benefits, etc.

III.III. Market remedies based on the competition Market remedies based on the competition ppproblems identified in step II and Tel. Law problems identified in step II and Tel. Law Provisions Provisions

1616

SMP designation of Mobile SMP designation of Mobile OOOperatorsOperators

TRE has concluded two market analysis TRE has concluded two market analysis procedures: 2006 and 2007procedures: 2006 and 2007

Relevant markets in both analysis:Relevant markets in both analysis:Relevant markets in both analysis: Relevant markets in both analysis: Wholesale level: Mobile call termination on Wholesale level: Mobile call termination on individual mobile networksindividual mobile networksindividual mobile networksindividual mobile networksRetail level: Publicly available mobile servicesRetail level: Publicly available mobile services

1717

SMP designation of Mobile Operators cont.SMP designation of Mobile Operators cont.

Mobile SMP designation in 2006:Mobile SMP designation in 2006:77thth of February of February -- 77thth of March: Public Consultation on Market Analysis. of March: Public Consultation on Market Analysis.

thth2626thth of April: Final Market Analysis concluded and TRE issued decisions on of April: Final Market Analysis concluded and TRE issued decisions on SMP:SMP:

AMC: SMP in mobile call termination on AMC networkAMC: SMP in mobile call termination on AMC networkVodafone Albania: SMP in mobile call termination on Vodafone Albania networkVodafone Albania: SMP in mobile call termination on Vodafone Albania networkAMC and Vodafone Albania: SMP on public mobile services marketAMC and Vodafone Albania: SMP on public mobile services marketAMC and Vodafone Albania: SMP on public mobile services market.AMC and Vodafone Albania: SMP on public mobile services market.

MNO’s contested (administrative appeal) the SMP designation in the public MNO’s contested (administrative appeal) the SMP designation in the public mobile services market, but not the SMP designation on mobile call mobile services market, but not the SMP designation on mobile call termination.termination.No court appeal from MNO’s against the TRE’s decisions on SMPNo court appeal from MNO’s against the TRE’s decisions on SMPNo court appeal from MNO s against the TRE s decisions on SMP.No court appeal from MNO s against the TRE s decisions on SMP.Mobile SMP designation in 2007:Mobile SMP designation in 2007:1818thth of June of June –– 18 July: Public consultation on Market analysis18 July: Public consultation on Market analysis1818thth September: Final Market Analysis concluded and TRE issued decisions September: Final Market Analysis concluded and TRE issued decisions p yp yon SMP:on SMP:

AMC: SMP in mobile call termination on AMC networkAMC: SMP in mobile call termination on AMC networkVodafone Albania: SMP in mobile call termination on Vodafone Albania networkVodafone Albania: SMP in mobile call termination on Vodafone Albania networkAMC and Vodafone Albania: SMP on public mobile services market.AMC and Vodafone Albania: SMP on public mobile services market.

1818

Mobile call terminationMobile call terminationMobile call terminationMobile call terminationMarket definition 2006/2007: Market definition 2006/2007: Mobile call termination on each network (market 16Mobile call termination on each network (market 16Mobile call termination on each network (market 16 Mobile call termination on each network (market 16 of EC 2002 directives)of EC 2002 directives)SMP designation 2006/2007:SMP designation 2006/2007:100% k t h (b d fi iti )100% k t h (b d fi iti )100% market share (by definition);100% market share (by definition);No threat from new entrantsNo threat from new entrantsLow countervailing buying power Low countervailing buying power 2006: Very high levels of mobile call termination2006: Very high levels of mobile call termination-- 23 23 eurocent/minute (the highest in EU and SEE eurocent/minute (the highest in EU and SEE countriescountries--88% higher than EU average). See graph.88% higher than EU average). See graph.2007: 43% reduction in mobile termination tariff 2007: 43% reduction in mobile termination tariff during 2006 was due to TRE intervention through during 2006 was due to TRE intervention through dispute resolution, not to competitive pressure.dispute resolution, not to competitive pressure.

1919

Mobile call terminationMobile call terminationMobile call terminationMobile call terminationIdentified problems in mobile termination: Identified problems in mobile termination: 20002000--2004: revenue sharing mechanism. Termination 2004: revenue sharing mechanism. Termination fixedfixed--mobile not less then 32 eurocent/minute (40 ALL)mobile not less then 32 eurocent/minute (40 ALL)--detrimental to the fixed networks end users and no detrimental to the fixed networks end users and no i ti f t iff d tii ti f t iff d tiincentive for tariff reduction;incentive for tariff reduction;20052005--2006: Price discrimination based on the origin of 2006: Price discrimination based on the origin of traffic (national originated traffic 23 eurocent/minute; traffic (national originated traffic 23 eurocent/minute; international traffic 10 eurocent/minute) resulting in highinternational traffic 10 eurocent/minute) resulting in highinternational traffic 10 eurocent/minute) resulting in high international traffic 10 eurocent/minute) resulting in high tariffs for fixed to mobile and mobile off net calls;tariffs for fixed to mobile and mobile off net calls;High termination charges enable leverage of market High termination charges enable leverage of market power into retail markets (price squeeze) and createpower into retail markets (price squeeze) and createpower into retail markets (price squeeze) and create power into retail markets (price squeeze) and create barrier to new entrants (network operators and service barrier to new entrants (network operators and service providers)providers)

2020

Remedies for mobile terminationRemedies for mobile terminationTelecom. Law provisions for Telecom. Law provisions for

interconnection of SMP operatorsinterconnection of SMP operators::interconnection of SMP operatorsinterconnection of SMP operators::

Transparency: SMP Transparency: SMP must publish interconnection technical terms and conditions and interconnection tariffsterms and conditions and interconnection tariffs.

NonNon--discrimination: discrimination: provide interconnection to third parties in ff fthe same quality and tariffs as they provide for their own services

Price control: Price control: be cost-oriented, reasonable return on ce co oce co o ,investment, not reduce competitiveness between operators in the telecommunication market as well as not be discriminative and provide equal treatment”

2121

Remedies for mobile termination cont.Remedies for mobile termination cont.Remedies for mobile termination cont.Remedies for mobile termination cont.Other developments:Other developments:July 2006: dispute resolution (mechanism):July 2006: dispute resolution (mechanism):July 2006: dispute resolution (mechanism):July 2006: dispute resolution (mechanism):

Fixed incumbent operator and mobile operators didn’t agree on new Fixed incumbent operator and mobile operators didn’t agree on new interconnection tariffs, and the case (dispute) was brought to TRE. interconnection tariffs, and the case (dispute) was brought to TRE. TRE decision: New mobile termination tariffs were set at the EU 25 TRE decision: New mobile termination tariffs were set at the EU 25 benchmark level: 13 eurocent/minute (11benchmark level: 13 eurocent/minute (11thth Implementation Report) aImplementation Report) abenchmark level: 13 eurocent/minute (11benchmark level: 13 eurocent/minute (11 Implementation Report) a Implementation Report) a 43% reduction (see graph)43% reduction (see graph)..The decision concerned only termination charge for domestic calls. The decision concerned only termination charge for domestic calls.

August 2006: Two MNO’s and fixed incumbent signed the interconnection August 2006: Two MNO’s and fixed incumbent signed the interconnection agreements:agreements:agreements: agreements:

Termination charge for domestic calls followed the TRE decisionTermination charge for domestic calls followed the TRE decisionThe gap between mobile call termination of international and domestic The gap between mobile call termination of international and domestic traffic was reduced to 1.6 and then to 0 eurocent (from 14 eurocent). traffic was reduced to 1.6 and then to 0 eurocent (from 14 eurocent).

OO iiOnOn--going processes:going processes:DraftDraft--regulation on access and interconnection provides rules, procedures and content of regulation on access and interconnection provides rules, procedures and content of RIORIOMethodology for price regulation (glide path based on benchmark) for medium termMethodology for price regulation (glide path based on benchmark) for medium termProject for BUProject for BU LRAICLRAIC

2222

Project for BUProject for BU--LRAIC LRAIC

Mobile call termination contdMobile call termination contdMobile call termination contd.Mobile call termination contd.Average mobile termination rate, July 2005

20.00

25.00

t

10.00

15.00

euro

cent

/min

ut

EU 25 average 12.96 eurocent/minute

0.00

5.00

en UK ay ia ep ep nd ry ain 25 30 lta nd ark ia ce nd ny ds m rg gal

ce d aly

nia ia ria 06 06

e

Swed

e U

Nor

wa

Latv

Cze

ch R

e

Slov

ak R

e

Irela

n

Hun

ga Spa

Aver

age

EU2

Aver

age

3

Mal

Icel

an

Den

ma

Aust

rFr

anc

Pola

n

Ger

man

Net

herla

nd

Belg

iu

Luxe

mbo

uPo

rtug

Gre

ec

Switz

erla

n Ita

Esto

n

Slov

enBu

lga r

a de

ri 31

.07.

200

Alba

nia

1.08

.200

2323

Alba

ni A

Public Mobile servicesPublic Mobile servicesPublic Mobile servicesPublic Mobile servicesRelevant Market: publicly available mobile services Relevant Market: publicly available mobile services p yp y(access and outgoing calls)(access and outgoing calls)No independent service providers (SP,MVNO etc) ;No independent service providers (SP,MVNO etc) ;Common pricing constraint (access plus outgoing calls part of theCommon pricing constraint (access plus outgoing calls part of theCommon pricing constraint (access plus outgoing calls part of the Common pricing constraint (access plus outgoing calls part of the same relevant market);same relevant market);Strong basis for substitution of access to mobile and fixed network, Strong basis for substitution of access to mobile and fixed network, but given:but given:but given:but given:

the different characteristics (mobility v fixed), the different characteristics (mobility v fixed), large differences in prices and large differences in prices and

id th t th ld it h f fi d t bilid th t th ld it h f fi d t bilno evidence that the consumers could switch from fixed to mobile no evidence that the consumers could switch from fixed to mobile accessaccess

access to fixed and mobile network, are not in the same relevant marketaccess to fixed and mobile network, are not in the same relevant market

2424

Public Mobile services contd.Public Mobile services contd.Public Mobile services contd.Public Mobile services contd.

Market shares and market sizeMarket shares and market sizeMarket shares and market sizeMarket shares and market sizeStable market shares from 2003. Each MNO nearly 50% market share Stable market shares from 2003. Each MNO nearly 50% market share for 3 years; for 3 years; The decline of market share of AMC in 2001The decline of market share of AMC in 2001--2003 was associated with2003 was associated withThe decline of market share of AMC in 2001The decline of market share of AMC in 2001 2003 was associated with 2003 was associated with strong mobile market(nr.subscribers) growth;strong mobile market(nr.subscribers) growth;Important factors affecting the demand growth: Important factors affecting the demand growth:

Very low penetration of fixed telephony);Very low penetration of fixed telephony);Long and lasting waiting lists for access to PSTN (unmet demand for access Long and lasting waiting lists for access to PSTN (unmet demand for access to public telephone network);to public telephone network);High level of migration, have boosted the demand for access to public High level of migration, have boosted the demand for access to public telephone networktelephone networktelephone network.telephone network.

ERG SMP Guidelines: collusion in markets with strong demand growth ERG SMP Guidelines: collusion in markets with strong demand growth very likelyvery likely

2525

Mobile subscribers market sharesMobile subscribers market sharesMobile subscribers market sharesMobile subscribers market sharesMarket Shares and number of users (000's)

AMC Vodafone

781 5 748 7

990 920.0

2005

2006

638.7 620.5

781.5 748.7

2004

2005

501.1 285.0

592.8 506.8

2002

2003

28.8 0.0

260.9 91.0

2000

2001

2626

0% 20% 40% 60% 80% 100%

2000

Public Mobile services cont.Public Mobile services cont.Public Mobile services cont.Public Mobile services cont.High entry barriers at the wholesale level and High entry barriers at the wholesale level and l k f SP d MVNOl k f SP d MVNOlack of SP and MVNO lack of SP and MVNO in mobile market limit the in mobile market limit the incentive of MNO to compete, increasing the ability of incentive of MNO to compete, increasing the ability of operators to influence market conditions;operators to influence market conditions;p ;p ;

Impact of the potential competition from the third Impact of the potential competition from the third p p pp p p(or other) licensed mobile operator is expected (or other) licensed mobile operator is expected to be limited: to be limited:

Practice/empirical evidence has shown that sequential entry in Practice/empirical evidence has shown that sequential entry in mobile market is less effective than simultaneous entry.mobile market is less effective than simultaneous entry.

2727

Public Mobile services contPublic Mobile services contPublic Mobile services cont.Public Mobile services cont.

Suppliers behaviorSuppliers behaviorppppVery high and stable prices for 5 years Very high and stable prices for 5 years offoff--net and mobilenet and mobile--fixed prices constant for 5 years;fixed prices constant for 5 years;Mobile tariffs the highest in the region: prepaid postpaidMobile tariffs the highest in the region: prepaid postpaidMobile tariffs the highest in the region: prepaid, postpaid Mobile tariffs the highest in the region: prepaid, postpaid (usage and fixed charges)(usage and fixed charges)Mobile OECD baskets 2005: Albania the highest level of Mobile OECD baskets 2005: Albania the highest level of expenditure for 3 baskets in SEE countries and theexpenditure for 3 baskets in SEE countries and theexpenditure for 3 baskets in SEE countries and the expenditure for 3 baskets in SEE countries and the highest for Medium and High usage baskets in EU25;highest for Medium and High usage baskets in EU25;ARPU for postpaid customers (2400 euros/year) the ARPU for postpaid customers (2400 euros/year) the highest in EU and almost two times higher than Irelandhighest in EU and almost two times higher than Irelandhighest in EU and almost two times higher than Ireland highest in EU and almost two times higher than Ireland of second place;of second place;EBITDA high and stable at nearly 60%.EBITDA high and stable at nearly 60%.ROCE high and stable 2004ROCE high and stable 2004 2006: 23%2006: 23% 39%39%

2828

ROCE high and stable. 2004ROCE high and stable. 2004--2006: 23%2006: 23%--39% 39%

OECD mobile baskets (monthly)OECD mobile baskets (monthly)OECD mobile baskets (monthly)OECD mobile baskets (monthly)

K h i i i h i h t t OECD BE Sh i iKrahasimi i shpenzimeve per shportat OECD: BE-Shqiperi

120

Min Mes Max Albania

80

100

TVSH

)

40

60

Euro

/mua

j (m

e

0

20

Low Medium High Low Medium High

2929

Low Medium High Low Medium High

2005 2006

Shportat/Viti

Public Mobile services contPublic Mobile services contPublic Mobile services cont.Public Mobile services cont.

Retail price reductions during 2006:Retail price reductions during 2006:Retail price reductions during 2006:Retail price reductions during 2006:Increase of the minimum call duration chargeIncrease of the minimum call duration chargeApplied to limited groups of consumersApplied to limited groups of consumersApplied to limited groups of consumersApplied to limited groups of consumersApplied by both MNO’s after the new Applied by both MNO’s after the new interconnection agreements that resulted ininterconnection agreements that resulted ininterconnection agreements, that resulted in interconnection agreements, that resulted in increased revenue from incoming increased revenue from incoming international trafficinternational trafficROCE remains high and stable. 2006: 28%ROCE remains high and stable. 2006: 28%--39%39%

3030

Public Mobile services contd.Public Mobile services contd.Public Mobile services contd.Public Mobile services contd.

Consumer benefitsConsumer benefitsConsumer benefitsConsumer benefitsVery low minutes of use (outgoing calls) and SMSVery low minutes of use (outgoing calls) and SMSMobile number portability not in use: high cost of switchingMobile number portability not in use: high cost of switchingVery low countervailing buying power: 97% prepaid customersVery low countervailing buying power: 97% prepaid customersVery low countervailing buying power: 97% prepaid customersVery low countervailing buying power: 97% prepaid customersConsumer information on tariffs for postpaid packages very low: limited Consumer information on tariffs for postpaid packages very low: limited number of exclusive shops that sell postpaid packages.number of exclusive shops that sell postpaid packages.

SMP analysis has shown that there are severeSMP analysis has shown that there are severeSMP analysis has shown that there are severe SMP analysis has shown that there are severe competition problems in the mobile market, that competition problems in the mobile market, that have a very detrimental effect on the consumers of have a very detrimental effect on the consumers of mobile services in Albania.mobile services in Albania.

3131

Remedy:Remedy:Remedy:Remedy:

Law on telecommunications:Law on telecommunications:Prices charged by organisations with significant market Prices charged by organisations with significant market

bj t t t iff t lbj t t t iff t lpower are subject to tariff control.power are subject to tariff control.When TRE determines that there is not sufficient When TRE determines that there is not sufficient competition in the market for a service or group of competition in the market for a service or group of service to ensure reasonable tariffs, TRE proposes to service to ensure reasonable tariffs, TRE proposes to the Minister for submission to the Council of Ministers the Minister for submission to the Council of Ministers the sublegal act for application of tariff control to that the sublegal act for application of tariff control to that service or group of services and service or group of services and determines terms of determines terms of price control. price control.

3232

Market analysis: FixedMarket analysis: FixedMarket analysis: FixedMarket analysis: Fixed1414thth of August of August -- 2828thth of September: Public of September: Public ConsultationConsultationConsultationConsultationRelevant markets:Relevant markets:

Retail: Retail: Access to the public telephone network at a fixed locationAccess to the public telephone network at a fixed locationPublicly available telephone services provided at a fixed Publicly available telephone services provided at a fixed locationlocation

Wh l lWh l lWholesaleWholesaleCall termination on individual fixed networkCall termination on individual fixed networkCall origination on all fixed networksCall origination on all fixed networksN ti l t it fi d t kN ti l t it fi d t kNational transit on fixed networksNational transit on fixed networksInternational transit on fixed networksInternational transit on fixed networks

SMP: Fixed incumbent SMP: Fixed incumbent -- AlbtelecomAlbtelecom

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Topics of interestTopics of interestTopics of interest Topics of interest

Incoming International and national trafficIncoming International and national trafficIncoming International and national traffic Incoming International and national traffic call termination: part of the same relevant call termination: part of the same relevant market? market? Licensing/authorization regime for Transit Licensing/authorization regime for Transit service and for carriers of national and service and for carriers of national and international trafficinternational trafficAccess/interconnection under the 1998 Access/interconnection under the 1998 and 2002 framework, and imposition of and 2002 framework, and imposition of obligations for access. obligations for access.

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Thank You for your AttentionThank You for your Attention

Hydajet KOPANIHydajet KOPANIBoard Chairman/Executive DirectorBoard Chairman/Executive Director

Altin RAPAJAltin RAPAJDirector of Market Regulation Director of Market Regulation

Telecommunications Regulatory Entity of AlbaniaTelecommunications Regulatory Entity of Albaniaarrapaj@ert gov alarrapaj@ert gov al

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arrapaj@ert.gov.alarrapaj@ert.gov.al