Romania’s telecom market suffered more than most in last year’s recession, and it will take some time to bounce back, according to a new report from Pyramid Research .

"Romania: Telecom Services Face a Long Road to Recovery" reveals that Romania’s total telecom services revenues during 2009 slipped 8.3 percent year-on-year to 15.7 billion Romanian New Lei (US$4.6 billion).

The report, written by Sylwia Boguszewska, says the return to positive numbers -- an annual growth rate (CAGR) of 2.9 percent is predicted for the next five years -- will be sluggish partly because of Romania’s unusual demographics: A decline in population is predicted during the forecast period, with reduced rates of fertility and increased migration to wealthier European states as a result of Romania’s accession to the European Union.

However, remittances sent home by these migrant workers have been helping drive growth in recent years, affording Romanians on low incomes back home access to services that may have been out of reach before.

In Romania’s mobile sector, Vodafone Romania and Orange Romania ’s revenues were hit particularly hard in 2009, partly due to increased price competition and reductions in mobile termination rates. However, more important than either of these factors, says the report, was the fluctuation in currency exchange rates: While mobile operators quote their tariffs in euros, most workers in Romania are paid in the New Lei, which means that those tariffs become less and less affordable as the local currency depreciates against the euro. (See Vodafone Lofts WiFi Cloud.)

But growth will come, says the report, in a range of market sectors, with VoIP, mobile data, and fixed broadband all earmarked for double-digit growth in the next five years.

Pyramid predicts that VoIP revenues will grow at a CAGR of 28.3 percent between 2009 and 2014, accounting for 13.7 percent of voice revenues in 2014. VoIP is becoming a crucial element of increasingly popular bundled services, says the report. Cable operator UPC Broadband claimed a 42 percent share of VoIP connections in 2009, and incumbent Romtelecom S.A. is preparing to enter the VoIP arena to help offset the inevitable decline in its circuit-switched customer base.

Mobile data’s surge will see it double its share of total average revenue per subscriber (ARPS), up from 15 percent in 2009 to 30 percent in 2014, while fixed broadband growth will be predominantly DSL-driven: The report predicts DSL line CAGR of 16.5 percent in the 2009-2014 period, with 1.7 million DSL connections expected by the end of 2014.

On the competition front, Pyramid paints a familiar picture of the incumbent gradually losing revenue share as circuit-switched voice continues its steady decline, while the battle for a slice of the mobile market pie becomes increasingly fierce. It is this stiff competition, believes Boguszewska, that will ultimately prevent Romtelecom’s relatively new CDMA/EVDO mobile broadband service from offsetting its overall decline in fixed revenue. (See Romtelecom Deploys Comptel's OSS and Cosmote Buys Zapp.)

As if that weren’t enough, both Vodafone and Orange have been asking Ancom , the Romanian regulator, to lower Romtelcom’s LLU prices, indicating that they have designs on the fixed broadband market, too, possibly in the form of fixed and mobile broadband and mobile voice bundles.

The future for Romania's operators? There will be casualties. There will be blood. But, in the fullness of time, there will be growth.

— Paul Rainford, freelance editor, special to Light Reading