Telecoms Business and the EU

1
Telecoms Business and the EU An Operators
PerspectiveJohn Munnery
Vitosha Consultants Ltd
2
Our Experience
Vitosha Consultants Ltd

• 14 years in South East Europe
• 16 years in Mobile plus substantial fixed
  experience
• Where Bulgaria, Macedonia, Serbia, Croatia,
  Georgia
• For who BT, CW, Deutsche Telecom/Matav, Soros,
  BTC and others
• Boutique consultancy, forming teams as necessary,
  or cooperating with other lead consultancies

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EU Practice a pragmatic view
Vitosha Consultants Ltd

• Breaking of monopolies and cartels
• Best deal for customers - consultation
• Sector Development
• Effective regulation through an empowered Civil
  Service
• New entrants encouraged, but trend is towards
  consolidation either in national groupings, or
  international product service lines

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The Telecoms Market in Bulgaria
Vitosha Consultants Ltd

• Total value around 1.3 billion Euro
• 500 million BTC
• 700 million Mobile
• 100 million rest (ISPs, Cable, calling card)
• Issue is more about redistribution of incomes
  than fighting for the limited growth in the
  market (driven primarily by GDP growth)
• Is anyone not for sale?
• New entrants open the market, but trends are
  towards consolidation, either along international
  product service lines, or local groupings
  (possibly only way in BG to get critical mass)

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Monopoly and Cartel Issues in BG
Vitosha Consultants Ltd

• Two operators with SMP one in Mobile, other in
  fixed
• Third substantial player in mobile close behind
• All three account for /- 90 of BG telecoms
  revenues
• Sector growth is limited to GDP a bit
• Fight is for revenue redistribution/protection
  which is determining the strategy of the big
  players
• Impact of fixed rebalancing
• Informal cartels in Mobile no one wants to
  reduce prices
• There is enough Mobile and fixed backbone
  capacity in place for many, many years new
  infrastructure/opportunities needed only for the
  last mile
• Impact of new technologies Wimax, PMP in
  particular exclusion of operators with SMP

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The Achilles Heels

• Poor fixed network in BG has resulted in mobile
  substitution may be beyond recovery EU former
  incumbents are running fast to stand still
• Fight for 100 on-net traffic artificially high
  cross-operator charges key regulatory/competition
  issue
• BTC making positive steps but may be too little
  too late limited reach of services such as DSL
  party line problems
• Privatisation is taking some time to turn BTC
  round unlike elsewhere not protected by monopoly
• Existing mobile businesses have vulnerabilities
  relatively high tariffs and little revenue
  growth. Will seek to extend market to retain
  revenues
• Short term business objectives

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Key Issues
Vitosha Consultants Ltd

• Local loop unbundling but dont forget the
  Mobile local loop!
• Domestic access BTC, Gas, Electricity, CATV
  who can afford the investment and who can offer
  quality?
• Breaking of the Mobile Cartel business
  pressures on GSM1, 2 and 3 unlikely to drive down
  prices and 3G process did not bring in a new
  entrant answer may be mandatory service
  provision/MVNO operations
• There is sufficient transmission infrastructure
  in BG for all possible demands for the next 10
  years the access technology (outside mobile) is
  the issue how do entrepreneurial operators get
  into this?

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Areas for Growth
Vitosha Consultants Ltd

• Data explosion in customer numbers and data
  transmission needs BG is hungry but
  penetration of PCs is low, so there are limits
• Internet is Free attitude but corporate sector
  is becoming demanding in price and quality
• Schools programme will drive expectations
• But majority of market is hungry for cheap voices
  and SMS (and SMS is a data service)
• BTC rebalancing offers opportunities

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Key Issues for BG
Vitosha Consultants Ltd

• Revenue redistribution is a greater driver that
  growth alone and the near monopolies have little
  growth potential
• Competition fed by consolidation present
  situation is divide and rule
• Long-term business view would help
• The giants have vulnerabilities
• New licences should be awarded to companies with
  no SMP
• Continued regulatory pressure needed to open up
  networks and allow successful models to be
  imported from other European countries
• How are the customers view heard need for
  lobby Telecoms Users Association