Challenges ahead for local telecom operators

Despite a very low average revenue per user and operators’ difficulties for infrastructure investments, Romania’s communications market could be still attractive on a long-term due to its local advantages.

Despite the global economic turbulence, no one can deny new technologies’ wave. IT and communications sector has registered a slight recovery with an 8 per cent increase this year. So, regardless of the consumers’ reluctance to spending, gadget fans are more and more interested to keep step with the latest devices and services of telecom operators, especially as mobile internet is gaining ground and is attempting to overcome the old PC. According to a recent Gartner research in the UK, the global mobile phone market show sales up 5.6 per cent in the third quarter as compared to last year, with an impressive 42 per cent growth in Smartphone sales. As a matter of fact, smart phones now account for a quarter of all mobile sales. Broadband speed is also becoming more important as on-demand TV become more popular.

In Romania, official figures show that only 54 per cent of Romanians have internet access, but the country’s commitment is to provide full national coverage with broadband internet connections by 2013. As Communications Minister Valerian Vreme recently said, the contract offering Romania EUR 84 M to spend for the expansion of Internet networks in all areas is due to be signed next year. In this respect, operators must include quality indicators for the Internet service in the contracts with their final clients.

Thus, despite having the lowest prices in the EU (the average revenue per user- ARPU is about EUR 7) and despite operators’ tough challenges for serious infrastructure investments, Romanian communications market could be still attractive on a long-term due to its local advantages. A recent survey shows that local users care less about how long the battery lasts and more about what they can do with their phone.  Other statistics rank Romania on the third place in the world in high-speed Internet connectivity.

As mobile internet has somehow come as a compensation for the lack of fixed broadband infrastructure, mobile operators are challenged to find new ways to convince Romanians to buy gadgets. According to CEE Telco Industry Report 2011, conducted by GfK this summer, only 8.4 per cent of the mobile operators’ clients in Romania have a Smartphone, comparing to a 14 per cent at the level of Central and Eastern Europe. The study shows that mobile net accessing is in direct connection with Smartphone’s incidence. The report’s authors conclude that Smartphone’s holders are attractive targets to on-line retailers and advertisers, as over 30 per cent of them are on line buyers. So, Romania seems to follow the global trend. Visa Europe-Romania’s predictions show that Smartphone sales will go from 5 billion to 50 billion in 10 years as payments via mobile phone will exceed payments via banking cards.

Local operators are keeping up with the market’s needs. Vodafone has recently gifted its users with free Internet connection in the tube stations, a service based on a 3G/HSDPA solution. Vodafone has also launched this year his own brand of Smartphone, operating with Android 2.2 system. No later than this month, Orange officially launched iPhone4S, the most recent Apple Smartphone, which will be available also in Cosmote stores.

Long term evolution (LTE) is another challenge for Romania’s telecom market. The European Commission plans to adopt the Radio Spectrum Policy Program next year, forcing the transition from analogue to digital terrestrial TV, which will allow some of the TV bandwidth to be used for new technologies as LTE. The National Authority for Administration and Regulation in Communications (ANCOM) is due to organize  by the end of next year an auction for the first LTE licenses in the 800 Mhz and 2 GHz frequencies, so that the probability is to have these new technologies operational by 2013.  However, ANCOM seems to take the issue with caution, as it believes LTE will not be adopted by the customers too soon, the wisest way being to let the market decide the level of LTE license tax. Operators are also willing to see how the local market is going to accept the Near-field communication (NFC).

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