Romania Telecommunications Report Q3 2008: Industry Research Report

Romania Telecommunications Report Q3 2008

Published Date: August 2008

Published By: Business Monitor International

Page Count: 65

Order Code: R302-3840

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BMI is now in possession of Romanian market data for the whole of 2007 and the first quarter of 2008. These data support our view that the country is ultra-competitive at the present time, perhaps more so than in neighbouring Poland, Hungary and the Czech Republic, all of which are seeing incumbents’ market shares being rapidly eroded by alternative service providers, prompting a flurry of mergers and acquisitions.

The standout players in the Romanian market are trio of quadruple-play service providers Romtelecom/Cosmote Romania, RCS&RDS and the newly established partnership of mobile operator Orange and pay-TV operator UPC Romania. Between them, the operators account for more than 95% of all fixed-line customers and well over 90% of all broadband customers. In the mobile sector, they are joined by Vodafone Romania, a subsidiary of Vodafone of the UK which has recently launched a fixedline offering of its own, but does not have a video offering yet. Orange maintains its dominant position in the Romanian mobile market and will do well if it can leverage UPC’s 1.2mn cable customers as a potential subscriber base for its cellular and 3G services. With more than 10mn customers of its own as of Q108, Orange also presents a significant marketing opportunity for UPC’s video, broadband and telephony offerings, though it is overshadowed by Orange’s success in the mobile broadband field (1mn mobile broadband customers). RCS&RDS launched its DigiMobil-branded 3G service in December 2007, offering handsets to its cable TV and broadband customers. In this way, it had managed to sign up 800,000 customers in just six months, representing three-quarters of its cable customer base. Whether it can grow beyond that market and indeed make any money from offering 3G services remains to be seen, but the short-term effect has been to massively increase the Romanian mobile market. Its impact has been felt most clearly by Orange and Vodafone, which have been trying to migrate their low-paying prepaid subscribers to more profitable postpaid plans, and which have therefore lost ground to the low-cost services targeted by RCS&RDS as well as Cosmote.

The latter company is still the fast-growing operator in Romania, however, adding 622,000 new customers in Q108 alone, to bring its subscriber base to 4.2mn. It may therefore only be another couple of years before Cosmote overtakes Vodafone as the second-largest mobile operator, unless Vodafone can quickly change direction. This would be good news for the beleaguered Romtelecom, which part-owns Cosmote. It also remains to be seen what effect the induction of Deutsche Telekom as a shareholder of OTE of Greece (Cosmote’s parent company), will have on operations in Romania and in the eastern Europe/Balkans market, where both Cosmote and Deutsche Telekom are long-term investors.

BMI expects that the Romanian mobile market will grow by 11% in 2008 to a total of 25.35mn customers (a penetration rate of 118%). Growth of 3.4% to 26.2mn will follow in 2009 but, even allowing for the arrival of Telemobil/Zapp in the 3G market and a new wireless broadband operator serving rural areas with a 450MHz service, mobile growth will then slow to the point where the market will be supporting 26.85mn subscribers by 2012 (125% penetration). There were 3.19mn broadband subscribers in Romania at the end of 2007, up by 80.2% from 1.77mn in 2006. Of the 2007 figure, 1.06mn subscribers were using mobile broadband services, up by 55.9% y-o-y.

Thus, it can clearly be seen that mobile broadband - along with cable and ADSL - is driving growth in this sector. As the new data for 2006 and 2007 give only slightly higher figures than the data we had been using as a baseline, we have not elected to revise our longer-term forecasts for the broadband sector at this time, and we still expect there will be 5.25mn customers by 2012 (24% penetration).

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