The telecom markets in 2003

The countries of the enlargement area have managed to implement almost all the acquis communautaire, even though the world-wide telecom crisis has exerted strong financial constraints on the process, the article says.

The countries of the enlargement area have managed to implement almost all the acquis communautaire, even though the world-wide telecom crisis has exerted strong financial constraints on the process:

The operator and regulator functions were separated via the creation of independent market authorities; the phone markets were opened up to competition, in particular by the completion (in 2003 in Lithuania, Romania and Slovakia) of the deregulation of the choice of operator (whatever the type of call) and the control of the invoicing policy followed by the incumbent operator.

The acceding countries have improved the competitive level of their incumbent operator, in particular through privatisations, as in the case of Matav in Hungary (owned by DeutscheTelekom), TPSA in Poland (with FranceTelecom as strategic partner) or the Romanian RomTel (owned by the Greek incumbent OTE). Three incumbents however will remain largely state-owned for an indefinite period: the Czech CeskyTelecom, the Bulgarian BTC and the Slovenian Telekom Slovenije.

The universal service obligations (European directive adopted at the beginning of 2002) will on the other hand pose special implementation problems, due in particular to the levels of land-line penetration which are significantly lower than in Western Europe, and which have to a large extent been overtaken by the population coverage achieved by the mobile operators.

Four series of major recompositions took place in the CEEC during the “post-bubble” and deregulation years (2001-2003):

From 2001 onwards, operators fell victim to a form of “credit crunch”, resulting from a fall of two-thirds in their share value and from the sharp decrease in interest from Western European operators. Private equity firms have stepped in only partially, far from the levels observed in the United States or in the EU. Although Vivendi managed to sell its Hungarian land-line subsidiary to AIG-Funds, on the other hand we witnessed the failure of DeutscheBank’s attempted acquisition of a 51% share in CeskyTelekom and that of the American venture capitalist Advent’s bid for 65% of the Bulgarian company BTC.

The very competitive mobile phone market (three significant operators per country on average) has skyrocketed, in some cases achieving near-universal subscription rates (nearly 90 subscriptions per 100 people in the Czech Republic); the profits made by the mobile companies in the enlargement area are among the highest in the world.

The development of land-lines might, on the other hand, have reached saturation point, which would stand at around 40 lines per 100 inhabitants (as against 55 in Western Europe). To date, the land-line market remains de facto monopolistic in the majority of the countries: the incumbent operator collects more than 90% of the land-line calls in the Czech Republic, Hungary and Poland (CeskyTelekom, in spite of the 31 licences granted to its land-line competitors, rent 98% of the existing lines). Internet connections in the area remain under the control of land-line operators. Broadband is developing, but its penetration remains limited.

Reaching saturation point in land-lines as well as in mobile subscriptions is inducing the operators to try and maximise the average income per customer (ARPU) in particular via the development of non-voice transfers (MMS, SMS, data). “Third generation” mobile phones are also becoming topical again: three Polish mobile operators aim to put this technology on the market in 2005; In 2004, Hungary will hold auctions for the award of 3G licences.

For more analyses of the EU’s enlargement process, see the

enlargement website of DREE.