Pyramid Points - One Day, Real Competition Will Come to Fixed Telecom Market in Slovakia

In February 2009, the European Commission officially appealed to the Slovakian government to amend the Slovak Competition Act, which puts the Slovak Anti-Monopoly Office (PMU) in charge of protecting and promoting competition and makes it accountable for applying Article 81 and 82 of the European Treaty. The two articles forbid cartels and other restrictive business practices and prohibit the use of a dominant market position. The European Commission claims that the Slovak Competition Act limits the ability of the Slovak competition authority to effectively implement those articles in the area of telecommunications, restraining the Slovak Telecommunications Office’s actions.

Adding to the excitement, antitrust officials from the European Commission swooped down on the premises of Slovak Telecom in January 2009 to assess whether the operator has exploited its market leadership and implemented anticompetitive measures in the areas of broadband, IPTV and voice provision. If the EC’s inquiry discovers that Slovak Telecom didn’t abide by EU competition rules, the company might be penalized 10% of its revenue for every year that it infringed EU antitrust rules. Slovak Telecom has a history of being accused of anticompetitive behavior. In August 2008, the PMU fined it almost Sk855m (US$41m) for taking advantage of its dominant position. The PMU declared that Slovak Telecom, which provides both fixed line and (through T-Mobile) mobile telephony services, intentionally withheld access to its local network from the competition. In December 2007, the country’s competition authority also fined the incumbent Sk526m (€16m) for abusing its dominant market position in the fixed telephony market in 2004 and 2005.

A quick glance at the telecom market in Slovakia reveals why the EU voices these concerns.

At year-end 2008, Slovak Telecom was the undisputable leader in the fixed services market (see Exhibit 1). Even though the fixed-line segment was liberalized in 2003, the operator continues to be the sole provider of circuit-switched voice and still hold the lion’s share of dial-up Internet access lines. Unless regulatory steps are taken, I don’t think this situation will change much in the near future. Alternative operators have long ago lost hope of getting a share of the PSTN pie and have decided to provide fixed services through other technologies, such as FTTx, FWA and cable. Given Slovak Telecom’s hold on the market, I believe these measures will loosen its grip only slightly, resulting in its market share falling 9% over the next four years: In 2013, it will still account for 50% of the broadband market. However, if the EU Commission decides to apply its full might, the future might be a bit grimmer for the dominant player in Slovakia.

Communications Markets in Slovakia
Country Intelligence Report published February 2009
The telecom market in Slovakia generated $2.1bn in service revenue in 2007 (excluding pay-TV), and we expect it to be worth $2.7bn by 2013. Mobile voice will continue as the largest revenue segment, but fixed VoIP will grow fastest, with a CAGR of 47.1% from 2008 to 2013, followed by IPTV with a CAGR of 38.1%. Broadband and mobile data revenue will account for 10.1% and 22.0% of total 2013 revenue respectively. This Country Intelligence Report analyzes Slovakia’s communications, media and technology industries, including key trends, regulatory pressures and the competitive landscape, making it an excellent complement to our Forecast products.

Central & Eastern Europe Mobile Handset Forecasts, Q4 2008
Forecasts published January 2009
Updated on a quarterly basis, our Mobile Handset Forecast products provide complete pictures of handset sell-through in each of four Central & Eastern European markets. The Excel output includes five years of historical data and five years of market projections for metrics such as total handset sales, handset sales by network technology, new handset sales (by technology, by technology generation, by feature set), smartphone handset sales, vendor market share and handset ASP. We believe our Handset Forecasts are superior because they capture sell-through (units sold to end users) rather than unit shipments (sales from manufacturers to distributors) and rely heavily on our Mobile Demand Forecasts. Moreover, they are based on extensive field research, and a consistent methodology that is applied to all markets.

IPTV Success Factors in CEE: Weak Pay-TV Competition, High Broadband Penetration and Affordability
European Regional Perspective published October 2008
IPTV is on the rise in Central and Eastern Europe, but the success has not been consistent across the region. So far, the Czech Republic is the most successful market. This Perspective examines the factors that make IPTV successful, including levels of broadband penetration and pay-TV competition, as well as determines what other actions operators launching IPTV should take to make it more attractive.