Pyramid: 3G Key to Slovakian Growth

New services such as IPTV, VoIP, and mobile broadband will be the main drivers of a moderate post-recession recovery by the Slovakian telecom market, according to a new report from Pyramid Research .

The report, published as part of Pyramid's Country Intelligence series, reveals that the telecom services market in Slovakia, a central European country of about 5.5 million people, contracted by 2.5 percent in 2009, generating €1.6 billion (US$2 billion) in revenues. The bulk of those revenues came from the mobile sector, which generated €1.3 billion ($1.6 billion), or 81 percent of the total.

However, the report’s author, Stela Bokun, expects the downturn to be short-lived: She predicts the market, which is dominated by Slovak Telekom (51 percent owned by Deutsche Telekom AG (NYSE: DT)) and Orange Slovensko a.s. (wholly owned by Orange (NYSE: FTE)), will enjoy a revival in 2010, growing by about 2 percent.

That fillip will fueled by greater uptake of value-added fixed-line services, and, particularly, increasing demand for mobile broadband connections. Although mobile penetration reached 103 percent in Slovakia in 2009 as fixed-to-mobile trends kicked in, there is still room for further growth, reports Bokun. She predicts that the number of mobile subscriptions will rise to almost 6.2 million in 2014 (a penetration rate of 114 percent), driven by the increasing popularity of mobile broadband.

With the main mobile operators (Slovak Telecom, using the T-Mobile brand, and Orange) having invested in the latest HSPA technology, demand for 3G services is already strong: Bokun expects 4.2 million mobile subscribers, around 70 percent of the total, to be using 3G services by 2014.

And the market for mobile broadband is to become even more competitive, as the third, and by far the smallest, converged operator (fixed and mobile services), Telefónica O2 Slovakia, is already trialling LTE and is set to snatch market share from the two leading players in the coming years, despite still being in the process of rolling out its 3G infrastructure. (See Telefónica, NSN Test LTE in Slovakia.)

The fixed broadband sector has bags of potential too, says Bokun, as the operators invest in high-speed technologies such as fiber-to-the-home (FTTH) and EuroDocsis 3.0. Fixed broadband penetration is set to rise from 12 percent in 2009 to 22 percent in 2014, predicts Bokun, with the growing availability of affordable high-speed access and VoIP services key to service provider competition during the next four years. (See Europeans Ramp FTTH Rollouts and Slovaks Use Huawei for GPON.)

Incumbent carrier Slovak Telecom still holds sway overall in the fixed-line sector, helped by the fact that local loop unbundling (LLU), though technically available since 2006, has not been strongly enforced. The EU is currently pushing for more competition in this sector, so competitive pressures on the fixed-line leader should grow in the coming years.

But Bokun sounds a note of caution: Although there are undoubtedly growth opportunities during the coming years for the Slovakian market's players, the country’s expected compound annual growth rate (CAGR) in terms of total telecom service revenue between 2009 and 2014 is the lowest in the region, at 3.7 percent.

— Paul Rainford, freelance editor, special to Light Reading

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