In our latest quarterly update on the Bulgarian telecommunications market we have left the mobile marketdata analysis section unchanged, while expanding the fixed-line and broadband market data analysissection.
The Bulgarian incumbent fixed-line operator Bulgarian Telecommunications Company (BTC) hasbeen privatised and is owned by American Investment Group (AIG). However, this has not coincidedwith an equivalent degree of liberalisation in the fixed-line and ADSL sectors, both of which remaindominated by BTC. Although a number of alternative operators do exist, high prices and other difficultieswith regards to access to the incumbent’s network appear to be derailing competition. This has resulted inspritely activity in alternative broadband technologies, with local area networks (LAN) being the mostdominant, accounting for around 57% of the broadband market at the end of 2008. There are also anumber of wireless broadband technologies available such as WiMAX from operators like NexcomBulgaria. At the end of 2008, there were over 850,000 broadband connections in Bulgaria, up fromaround 560,000 at the end of 2007.
The merger between Bulgaria’s two largest cable operators, Eurocom and CableTEL, has still not beenre-established after it was postponed due to the financial crisis. However, reports suggest that the relevantparties are still interested in merging and BMI is optimistic of negotiations reigniting. The merger wouldbe of huge benefit to the broadband sector, creating a player large enough to pose a threat to BTC, andhelping to drive the cable market forward.
The fixed-line sector has continued to decline in 2008 with BTC reporting a 9% fall in fixed-line sales. Atthe end of 2008, we estimate that there were just over 2.2mn fixed lines, representing penetration of29.3% and an annual subscriber decline of 3.7%. Going forward, we expect this rate of decline to slow asseveral promising factors come together. The regulator seems keen to encourage greater competition,mobile market growth is slowing which should result in less fixed-to-mobile substitution, and heaviermarketing of bundled services should help to stem the decline of the fixed-line sector. Nevertheless, westill expect it to fall as broadband access is expanded, spreading the availability of VoIP services andbetter postpaid mobile tariffs result in customers continuing to drop fixed lines in favour of mobileservices.
The mobile sector grew by just 6.5% in 2008, a poor performance after the 24.7% growth rate seen in2007. The market saw a large net loss in the first quarter of 2008, which we believe resulted from themobile operators discounting inactive SIMs. At 3.5%, growth in the final quarter of 2008 was strongcompared to the rest of the year, with 383,000 net additions. However, going forward we expect to seegrowth rates continuing to decline. As well as penetration being among the highest in the region, at142.8% at the end of 2008 and the risks of further discounting of inactive SIMs, the country’s two largestoperators are concentrating on migrating their prepaid customers to postpaid contracts. Mobiltel, themarket leader, and second largest operator Globul both saw the proportion of postpaid customers in theirsubscriber bases breach the 50% mark in Q408. This chase for higher value customers will result in lessconcentration on subscriber growth, leaving room for Vivatel and mobile virtual network operators(MVNOs) such as Petrol Mobile to sweep up prepaid customers. However, as competition for postpaidcustomers increases, tariffs will fall, resulting in fewer prepaid growth opportunities.
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