The Czech Republic telecoms market is undergoing a transition period with the arrival of MVNOs and the regulator's efforts to attract a fourth operator into the market. These pro-competition measures will add to a market that already contains a number of major international players such as Telefonica O2, T-Mobile and Vodafone in mobile, and Telefonica and UPC in wireline. The market has been under many of the same pressures as in neighbouring countries with market saturation; regulatory factors, such as cuts to mobile termination rates; and the impact of the eurozone crisis on macroeconomic performance acting as drags on performance. However, significant opportunities remain, not least in the booming wireless data market and VAS opportunities arising from the rapid proliferation of smartphone ownership.
- The latest ITU data show the negative impact of fixed-to-mobile substitution continues to hit operators. Total fixed-line subscriptions were down 8.3% in 2012 to 2.1mn at the end of the year.
- ARPU rates were down sharply y-o-y to Q2 2013 due to MTR cuts and price competition, while the threat of IP substitution could extend this decline over the medium term, putting pressure on operator strategies to increase data connectivity revenue.
- According to the latest data from the OECD and European Commission, the broadband market maintained growth momentum through 2012, particularly for high-speed wireline, however, there was stagnation in growth of dedicated mobile broadband subscriptions.
Key Trends And Developments
The long-awaited auction of LTE spectrum now looks set to take place in November 2013, with the CTU receiving five applications to take part in the auction. Telefonica O2, T-Mobile and Vodafone all submitted applications to take part in the auction, along with Revolution Mobile and Tasciane. The CTU is keen to get the auction under way after several aborted attempts in 2012 and 2013. However, in October 2013 Telefonica filed a lawsuit against the CTU over the conditions of the upcoming November 2013 auction for 800MHz, 1800MHz and 2600MHz spectrum. CTU is looking to encourage a new player to enter the market, but Telefonica feels that the measures the regulator has adopted are discriminatory and restrictive. BMI believes any further delays to the auction would be detrimental for consumers as the market would fall further behind regional peers in the roll-out of next generation wireless broadband services.
The potential for a fourth operator has had an impact on operator strategies in 2013 as they look to cut costs while rolling out next generation infrastructure. In August 2013, Vodafone and Telefonica O2 agreed to share their mobile networks in the Czech Republic to make savings on their network spending. Meanwhile, in September 2013 Telefonica and T-Mobile opened discussions over extending their existing 3G sharing deal to include 2G and 3G infrastructure. BMI considers network sharing agreements a positive response to shifting market conditions, however it has also been reported that Telefonica and T-Mobile are considering divesting their local operations, which we believe would be a negative development by removing international backers that are a key driver of expertise and service innovation.