Adoption of New Services to Spur Telecommunications Market in Central and Eastern Europe

Rigorous market regulatory policy and the 2009 economic slowdown has hit the telecommunications market in Central and Eastern Europe, said Frost & Sullivan in a new study.

According to the new analysis, the value of the telecommunications market in Central and Eastern Europe (Bulgaria, the Czech Republic, Hungary, Poland, Romania) decreased by 14 percent.

And that’s not all; the growth partnership company says that growth will continue to face challenges, due to saturation in the market’s main segments.

However, the increasing focus of telecom operators on entering new lucrative spaces, and the revision of current business models, will ensure that increasing growth rates are still achievable, the study said.

“Telecommunications in Central and Eastern Europe: Top Markets Outlook 2010,” also found that the market earned revenues of about $31.30 billion in 2009 and estimates this to reach around $36.74 billion in 2014.

“There is still a lot of growth potential within the broadband segment,” notes Edyta Kosowska, research analyst, Frost & Sullivan.

Kosowska said that increasing demand will be expected for high-speed technologies such as FTTH or EuroDOCSIS 3.0, as well as mobile broadband, especially in the peripheral areas.

The also study notes that the most important driver of telecom revenues will be the development of cross-vertical services such as m-payments, m-commerce and M2M. Operators will also benefit from heightened interest in advanced ICT solutions for the enterprise sector.

Telecom operator strategies in Central and Eastern Europe will not differ much from that of their Western European counterparts. Initially, they intend to focus on churn reduction, while keeping in mind that acquiring new customers is much more expensive than retaining existing ones.

Moreover, they will have the opportunity to leverage their existing customer base, attracting them with new services.

Although some price-sensitive customers have started to increasingly adhere to the level of telecom expenditure, the global economic crisis has had a relatively limited impact on the market. Instead, the leading factor that has had the biggest impact on operators’ revenue drop has been the rigorous market regulators’ policy, mainly in terms of MTRs and roaming tax reduction.

“The challenge for the immediate future will arise from the reality that most market regulators will follow the European Commission’s directions and focus on facilitating market access to other participants,” cautions Kosowska.

According to Kosowska, this will result in intensified competition.

The study points out that growing competition, especially in the broadband market, will also compel operators to revise their current business models. Being a simple connectivity provider will not guarantee reasonable profits. Operators will have to move up the value chain and become end-user providers.

“Telecom operators possessing significant bargaining power and an established customer base will be able to impose conditions on other parties,” concludes Kosowska.

Kosowska said that creating business models with favorable revenue shares or acquiring existing market participants should help operators gain competitive advantages and win additional sources of revenue from new services.

Anil Sharma is a contributing editor for virtual-pbx. To read more of Anil’s articles, please visit his columnist page.

Edited by Stefania Viscusi