Low fixed network penetration and poor quality of existing fixed-line infrastructure, coupled with increasing demand for broadband services, provide an opportunity for mobile operators in Central and Eastern Europe (CEE) to develop mobile broadband services. Fixed broadband penetration as a percentage of population in selected CEE countries, 2001–5, is shown in Figure 1.
Figure 1: Fixed broadband penetration in selected CEE countries, 2001–5 (Source: Analysys Research, 2006)
For mobile operators that have faced falling voice average revenue per user (ARPU) in the region as the market matures, the main incentive to deploy 3G networks has been an opportunity to create new revenue streams by capturing a share of the broadband market, especially in those areas where DSL or cable is not available. Analysys Research forecasts that non-peer-to-peer (non-P2P) data services, that is, data services other than email, chat facilities, unified messaging, short messaging service (SMS), enhanced messaging service (EMS), or multimedia messaging service (MMS), will be the key non-voice revenue category and will drive mobile revenue growth at a compound average growth rate of 36.2% (from EUR1.5 billion in 2005 to EUR9.8 billion in 2011).
In advanced CEE markets, such as the Czech Republic, Hungary, or Poland, operators are already offering mobile products that aim to substitute for fixed broadband. In other countries, such as Ukraine or Russia, this is likely to be a trend once 3G licences have been granted.
One mobile operator capitalising on the demand for mobile broadband is Eurotel Praha, which already had 70 000 subscribers to its flat-rate mobile broadband services running on the CDMA 1xEV-DO platform in 2005, prior to its merger with Ceský Telecom (and its re-branding to Telefónica O2 Czech Republic). In comparison, the total number of fixed-line broadband connections in the country was 420 000 at the end of December 2005.
In addition to 3G technologies, CEE mobile operators, many of which are subsidiaries of multinational operators, are also experimenting with alternative mobile broadband technologies, which offer throughput that is competitive with fixed broadband. For example, in the Czech Republic, T-Mobile launched data-only 3G services using UMTS TDD technology in October 2005, offering downlink connection speeds of 512kbit/s and 1024kbit/s. In Hungary, T-Mobile launched a high-speed downlink packet access (HSDPA) network with a downlink connection speed of up to 1.5Mbit/s, in May 2006. In Slovakia, T-Mobile launched a commercial mobile broadband network based on the Flash-OFDM technology in October 2005, offering average connection speeds of 1Mbit/s (downlink) and 256kbit/s (uplink).
Currently, prices for data services remain a barrier to adoption. However, the situation is changing, and increasing affordability will contribute to further uptake of mobile broadband services. T-Mobile Czech Republic offers a mobile broadband service with a 512kbit/s connection speed for a monthly fee of CZK999 (EUR34), with a data cap of 3GB. By way of comparison with a local fixed offering, the incumbent, Ceský Telecom, offers a 512kbit/s DSL connection for CZK399 (EUR13) per month, with a data cap of 1GB. We expect that – with increasing competition – prices for non-P2P data services will fall further, as is happening in Western Europe, and competition between fixed and mobile broadband opertators will lead to more and more competing bundles of broadband and voice.
The Central and Eastern European Mobile Market: trends and forecasts 2007–12 analyses current trends in the CEE mobile market, including the role of fixed–mobile substitution, alternative wireless technologies, and regulation. It presents comprehensive forecasts for the region as a whole, as well as for the Czech Republic, Hungary, Poland, Russia, Turkey and Ukraine. Forecasts are broken down by subscriber numbers, ARPU, revenue, retail spend and average spend per user for four market segments (residential prepaid, residential contract, SMEs and large corporations), three service categories (voice, P2P messaging and other data services) and four technology generations (2G, 2.5G, 3G and 3.5G).