European incumbents no longer account for the majority of retail fixed broadband subscriptions, according to the latest data from Analysys Mason’s Fixed Broadband research programme. The average retail market share of incumbent service providers in Europe fell to 49.8% at the end of the first quarter of 2010 (see Figure 1). This steady erosion has resulted in incumbents now averaging the lowest market share since 2001. Incumbents have several options to improve the situation but, even with scale on their side, none are straightforward.
![Figure 1: Incumbent retail fixed broadband market share for the ten largest broadband markets in Europe, 2004–2010 [Source: Analysys Mason, 2010]](/PageFiles/16111/Fig1a.gif)
Figure 1: Incumbent retail fixed broadband market share for the ten largest broadband markets in Europe, 2004–2010 [Source: Analysys Mason, 2010]
The Ukrainian government may sell its stake in Ukrtelecom, the fastest-growing European incumbent
Not every incumbent’s market share is eroding – the most striking exception is Ukrainian incumbent Ukrtelecom. Ukrtelecom is still increasing its market share, gaining three percentage points and achieving over 100 000 net additions the first quarter of 2010. We estimate that the incumbent achieved 47% higher revenue from fixed broadband in nominal terms in the first quarter of 2010 than it did in the first quarter of 2009 (EUR24.5 million in the first quarter of 2010). Despite its small size, Ukrtelecom is therefore one of the fastest-growing incumbent broadband service providers in Europe – it registered more net additions than Telecom Italia and Telefónica in their home markets in the first quarter of 2010. It also achieved the highest quarterly growth in subscriber numbers of the European incumbents, at 12.2%.
The Ukrainian government owns a 93% stake in the incumbent operator. However, this is likely to change in the next 12 months – the government has announced broad plans to privatise state assets. Ukrainian investment banks have identified Ukrtelecom as one of their top ten recommended investments for 2010.
Incumbents must innovate and differentiate in order to regain their competitive edge
The majority of European incumbents’ competition does not yet come from the cable operators or FTTH players, although both have more advanced networks and can frequently offer faster services. Incumbents’ greatest threats remain alternative DSL-based service providers. DSL continues to account for the majority (63%) of European net fixed broadband additions (see Figure 2).
![Figure 2: European fixed broadband subscriber quarterly net additions, March 2008 to March 2010 [Source: Analysys Mason, 2010]](/PageFiles/16111/Fig2a.gif)
Figure 2: European fixed broadband subscriber quarterly net additions, March 2008 to March 2010 [Source: Analysys Mason, 2010]
Every service provider is feeling the pressure to innovate and differentiate its services. However, incumbent service providers are now feeling an even greater pressure to evolve. Significant strategic opportunities include the following:
- Getting the IPTV formula correct. While service providers such as Belgacom, Iliad and SFR have successfully sold IPTV services to a large proportion of their fixed broadband subscriber bases, many IPTV propositions have yet to achieve 10% penetration. Looking to innovative markets such as Japan and the USA may provide examples to follow.
- Fixed–mobile broadband bundles. Fixed service providers have the opportunity to provide reliable mobile broadband services with fixed-line backhaul through the deployment of femtocells. This would give them better in-home mobile broadband performance than their competitors and could help to maintain the justification for a fixed broadband line in the home.
Analysys Mason's Fixed Broadband subscription research programme provides unrivalled tools, advice and insight to help you adapt to, and defend against, new competition. The combination of strategic insight with market metrics, such as an interactive pricing model, granular five-year country forecasts and comprehensive market share and technology trackers, make this programme an essential resource. Click here for further details.