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MARKET TRENDS AND GROWTH SECTORS IN THE
BALKAN TELECOM MARKETS
Stela Bokun, Senior Analyst, EMEA
Pyramid Research
April 2011
© 2008 Pyramid Research
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While in most Western European and Central Eastern European countries telecom revenue accounts for roughly 2%-2.5% of nominal GDP, in most Balkan markets telecoms account for a much larger share of GDP – in some cases exceeding 5%.
Telecom service revenue in the Balkan region represents a cumulative opportunity of US$87.6bn in the 2011-2015 period. Mobile market will account for 69% of the total telecom revenue in 2015.
Greece, which has the highest GDP per capita in the region, also had the most sizable telecommunications revenue in 2010; albeit, the country is facing a negative revenue CAGR 2010-2015 in line with its unstable macroeconomic environment.
Fastest growing revenue segments in 2010-2015 period will be IPTV, fixed broadband Internet access and mobile data across most markets, with mobile voice remaining the largest segment of the regions’ total telecom revenues.
While fixed broadband will continue expanding, attractive device financing schemes, thirst for mobility and growing access speeds will result in a more pronounced growth of mobile broadband in most Balkan markets
Most Balkan markets will see growing investments in new access technologies in both fixed and mobile segments; however, the uptake of high-speed access technologies in both fixed and mobile segments will continue to fall behind when compared to WE countries and some most advanced CEE markets too.
Executive Summary
© 2008 Pyramid Research
While in most Western European and Central Eastern European countries
telecom revenue accounts for roughly 2%-2.5% of nominal GDP, in most Balkan
markets telecom industry revenue account for a much larger share of GDP
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Tota
l Tele
com
Serv
ice R
evenue a
s %
of
Nom
inal G
DP
WE CEE
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Bulgaria Romania Greece
Serbia Croatia
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Telecom revenue as % of nominal GDP in WE and
CEE regions, 2010-2015Telecom revenue as % of nominal GDP in select
Balkan markets, 2008-2015
Source: Pyramid research fixed and mobile market demand forecasts, 1Q2011
© 2008 Pyramid Research
Telecom revenue in the Balkan region represents a cumulative opportunity of
US$87.6bn in the 2011-2015 period. Mobile market will account for 69% of the
total telecom revenue in 2015
$0
$5
$10
$15
$20
$25
$30
200720082009201020112012201320142015
Tota
l te
lecom
mark
et
revenue (
US$bn)
60.80%
39.20% Mobile
Fixed
4
TOTAL TELECOM SERVICE REVENUE IN THE
BALKANS*, 2007-2015
Balkan region includes: Albania, Bulgaria, Romania, Greece, Serbia,
Croatia, Macedonia, Bosnia and Herzegovina, Montenegro.
68.83%
31.17% Mobile
Fixed
REVENUE BREAKDOWN, 2007A
REVENUE BREAKDOWN, 2015E
Source: Pyramid research fixed and mobile market demand forecasts, 1Q2011
© 2008 Pyramid Research
Greece, which has the highest GDP per capita in the region, also had the most
sizable telecommunications revenue in 2010; albeit, the country is facing a
negative revenue CAGR 2010-2015 in line with its unstable macroeconomic
environment
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Serbia
Bulgaria
Romania
Greece
Croatia
BiH
-5%
-3%
-1%
1%
3%
5%
$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000
Serv
ice r
evenue C
AG
R 2
010-2
015
GDP per capita
THE SIZE OF SELECT TELECOM SERVICES MARKETS IN THE BALKAN REGION, 2010
The fastest growing revenue segments in 2010-2015 period
will be IPTV, fixed broadband Internet access and mobile data
across the region, with mobile voice remaining the largest
segment of the Balkan countries’ total telecom revenues
Source: Pyramid research fixed and mobile market demand forecasts, 1Q2011
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Greece mobile
The mobile revenue of most Balkan countries has been below the European
average in 2010; the situation is not much different on the fixed access side
either; given its demographic and macroeconomic potential, there is much room
for growth
0 5 10 15 20 25 30
Serbia
Croatia
Bulgaria
Slovakia
Hungary
Romania
Ukraine
Czech Rep.
Greece
Portugal
Sweden
Austria
Belgium
Poland
Spain
Russia
Germany
UK
Italy
France
Revenue (Euro bn) Source: Pyramid Research Mobile Demand Forecast, 1Q2011
Mobile service revenue in select European
markets, 2010
© 2008 Pyramid Research
Even in the countries which have relatively high fixed telephony penetration,
fixed to mobile substitution has resulted in skyrocketing mobile voice traffic
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Fixed telephony penetration across select markets, 2009 Mobile outgoing traffic in Serbia, 2003-2009
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Sources: UNDP and RATEL
© 2008 Pyramid Research
Facing stagnating mobile voice revenue (often related to MTR cuts), and
growing traffic, most operators are focusing on trying to grow mobile data
segments
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VIP Croatia , HUAWEI S7 Pad
499,00 kn Sve za mene 600
Telenor Serbia Smartphone
Promotions
WIND Hellas is
offering the
ZTE Blade on
prepaid for
just Euro159.
The Vodafone (Gr) Joy
845 is available for a
very competitive
price of Euro109.9 on
prepaid. 0% 10% 20% 30% 40%
W. Europe
C. & E. Europe
Balkans
Smartphone % of sell-through, 2010
Source: Pyramid Research Smartphone Forecast, 1Q2011 & operators’ websites
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Low fixed broadband penetration across the Balkan region will trigger strong
mobile broadband expansion. Even in Greece, one of the most advanced Balkan
markets, there is scope for mobile broadband adoption to grow by a factor of 3x,
given the economic potential
Greece mobile
Greece
Portugal
AustriaNetherlands
France
Spain
Romania
In some markets, mobile
broadband is positioned
as a fixed line alternative.
In some markets, fixed
broadband competition is
intense, limiting mobile
broadband appeal.
GD
P/ ca
pita
$, Y
E 2
01
0
Mobile broadband penetration of population vs GDP/ capita in
select European markets, 2010
Source: Pyramid Research Mobile Demand Forecast, 1Q2011
© 2008 Pyramid Research
Investments in technology upgrades will further spur the growth of mobile
data usage and revenues. The demand for higher speeds and more diverse
services and applications will eventually lead to investments in LTE across the
Balkans, albeit its uptake will be sluggish relative to WE countries and some of
the most advanced CEE markets
10
0%
2%
4%
6%
8%
10%
12%
2010 2011 2012 2013 2014 2015
WE Countries Balkan region
4G as % of mobile subscriptions WE v. Balkan, 2010-2015
Source: Pyramid Research Mobile Demand Forecast, 1Q2011
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Poland fixed
In the fixed arena, bundling is becoming a market norm in some Balkan markets,
with operators competing on speed as well as Value Added Services
Bulgaria blizoo offering Romtelecom fiber offering
SBB Serbia offering
BH Telecom offering
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While high taxation has restrained mobile broadband adoption in some markets,
market offers focus on the key barrier - low PC penetration
Greece mobile
0% 25% 50% 75% 100%
Albania
Bulgaria
Romania
Hungary
Greece
Serbia
Portugal
Poland
Spain
Italy
France
Netherlands
PC penetration of household, various
countries, 2010Vodafone Greece: Bundled offerings for
both tablets and netbooks, with the end
user benefiting from a reduced device
purchase price and an initial discount
period on the monthly contract fee.
Device financing offering, T-Home, Macedonia
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Poland fixed
While this differs across different countries in the region, higher speeds and
increasing coverage are at the top of the agenda for operators irrespective of
technology
Broadband
Growth
Cable:
• DOCSIS 3.0
investment;
•Pushing
bundled offerings
• Consolidation
resulting in
fewer, stronger
players.
DSL:
• Upgrade to vDSL;
Other technologies
• Consolidation of disparate
Ethernet operators;
• Fiber deployments (pending
regulatory decisions in some
cases);
Mobile:
• Upgrade to higher speeds +
eventual roll-out of LTE (trials in
Greece, LTE investment
commitments in Croatia etc.)
CDMA:
•Targeting rural
areas
•While voice still represents the lions’ share of revenues, the future revenue mix will see an increasingly prominent proportion of data.
•Market consolidation and privatizations in some cases will result in increased investments; this will spur the market growth.
Operator market strategies
•Mobile broadband and browsing/wap are the two true growth areas
• Continued proliferation of access bundles, which will lead to wider device adoption (and possible content sharing opportunities across multi-screens)
Connectivity
•Balkan countries are still lagging behind other European markets in terms of smartphone adoption
•Bundled PC and tablet offering to remove the lack of PC/tablet obstacle during the forecast period. Device portfolio
Growth opportunities in the Balkan telecom markets – Pyramid Perspective
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Greece mobile
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Stela Bokun, Senior Analyst, Europe