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Telecommunications in Eastern Europe

by Michael Gariffo

Copyright 2017, Faulkner Information Services. All Rights Reserved.

Docid: 00014439

Publication Date: 1704

Report Type: MARKET

Preview

The telecommunications markets of Eastern Europe
generally trail their western neighbors in terms of access to advanced services. The European Union has made some great strides in helping
promote competition in certain countries, and wireless technologies have helped
several nations overcome antiquated infrastructures left over from the Soviet
days. This report discusses the state of affairs in the Eastern European
telecommunications market. It identifies the companies driving growth in the
market and analyzes parts of the region that still have a long way to go.

Report Contents:

• Executive Summary
• Market Dynamics
• Market Leaders
• Market Trends
• Strategic Planning
  Implications
• Web Links

Executive Summary

[return to top of this report]

Eastern Europe is a large
and diverse region, largely made up of the republics of the former Soviet Union and the so-called
Iron Curtain countries. Except for a few, the
countries in the region are currently fighting an uphill
battle to bring their telecommunications sectors up to
par with their Western European counterparts.

They are mainly moving
forward as fast as possible with telecommunications
development programs for a variety of reasons, one being
the need to catch up with the Internet and information
economy, and the other being accession to, or the need to
cooperate with, the European Union (EU). The EU has had
an enormous effect within the region in providing both a
set of regulations suited to a modern, open economy and
in providing a model for achievement. The difference
between countries scheduled to enter the EU and those
that are not is fairly easy to see. The EU candidates
have open and privatized telecommunications sectors. 

Although Eastern Europe
still suffers from low fixed line teledensity, scant
fixed line infrastructure, and low Internet penetration,
the privatization of incumbent operators and increased
liberalization of the sector suggest that regulatory
reforms – though not as extensive as they need to be – are
starting to have a positive impact. Figure 1 is a map of
the region.

Figure 1. Eastern Europe

Source: CIA
World Fact Book

Population
statistics and economic indicators vary greatly among the countries in this
part of the world. The following chart provides population and
per-capita gross domestic population of these nations. 

Source: World Bank

Market Dynamics

[return to top of this report]

The drivers in this market are diverse and dependant upon each
country’s state of development, infrastructure, and level of
competition. Mobile service and development of Internet services have
been seen as priorities. Broadband access is also beginning to appear,
though it is very spotty and limited mainly to major metro areas and the
more developed countries. Table 2 shows the most recently available data
from the International Telecommunications Union.

Source: International Telecommunications Union (ITU)

Albania

The Albanian economy has started to rebound after the collapse of communism and
an influx of refugees from Kosovo in the late 1990s. The telecommunications
industry, however, has suffered from years of tough economic conditions and is
still one of the poorest in the region. Only about seven percent of the population
has a fixed-line telephone, with only slightly more having a broadband subscription.
These are the lowest fixed-line and Internet subscription rates in the region.

A company called Telekom Albania is the monopoly provider of fixed-line telephone
service and Internet access, and the lack of competition in the market has
seriously hampered any investment in the country's infrastructure. The Albanian
government tried to jump start growth in the market by trying to privatize
Telekom Albania in 1998, but there was little interest and the sale was put on
hold several times when the war broke out in neighboring Kosovo. In order to
make the company a more attractive investment, the government gave the company a
wireless license in 2004, and it finally sold a 76-percent stake to CT Tel, a
consortium of Turkish companies including Turk Telecom.

One positive area in the market is the wireless sector. Like many poor
countries, mobile technologies have played a key role in helping Albanian
citizens obtain basic telephone service because the networks are easier to build out.
At the end of 2015, Albania had 3.4 million mobile subscribers, a penetration
rate of 106 percent. While the landline and Internet sectors remain monopolies,
there are four companies competing in the mobile sector.

Telekom Albania was the first wireless carrier in Albania and began servicing
customers in 1996. It is the second largest carrier in the country. It has
1.2 million customers and 34 percent of the market. The current market leader is
Vodafone. It has 1.59 million customers and 46 percent of the market. The other
two carriers are Eagle Mobile (479,000 customers and 13 percent of the market)
and Plus (270,000 customers and seven percent of the market). The first three
carriers offer 4G service, and Telekom Albania started rolling out LTE-A
technology in 2015.

According to the most recent data published by the ITU, 60 percent of the
country uses the Internet but only seven percent have broadband Internet subscriptions. The Internet market is stifled
because it is controlled by a single provider, and Albtelecom has little
incentive to invest in the market because most Albanian citizens are simply too
poor to afford a computer.

Belarus

Belarus is one of the former Soviet Republics, having declared its independence
from the former Soviet Union in 1990. The country's telecommunications market is
one of the most advanced in Eastern Europe. The country has high penetration
rates for landline telephones, mobile customers, and Internet subscribers,
although the infrastructure is largely outdated outside of the capitol city of
Minsk. The main fixed-line provider is Beltelecom, the former monopoly provider.

Belarus has been under international pressure to privatize and liberalize its
telecommunications market in order to comply with mandates from the World Trade
Organization, and the government is looking to privatize several industries
by auctioning off its holding in several state-owned companies. One
sector that will be affected by these plans is the wireless market.

There are four companies competing in the market, and at one point, the
government held stakes in all of them. The current leader is MTS Belarus,
which is a joint venture between the federal government and Mobile TeleSystems,
the largest wireless carrier in Russia. The Belarusian government has tried
several times to sell its stake in MTS as the first step toward liberalizing the
telecom market, but it has been unsuccessful. The company launched 4G service in
2015.

The other companies competing in Belarus are Velcom, a division of Telekom
Austria; Life, a joint venture between Turkcell and the Belarusian government;
and a fourth carrier named beCloud that has just 4,500 customers on its LTE
network.

Over 30 percent of the country has a high-speed Internet subscription, which
is one of the highest rates in the region, although most of the high-speed
connections are confined to Minsk. MTS Belarus is attempting to change that by
rolling out a nationwide fiber-optic backbone over which it is offering
broadband Internet access.

Bosnia and Herzegovina

The Bosnian telecommunications market was devastated by the Bosnian War, which
was the bloodiest military conflict in Europe since World War II. The war
resulted in approximately $900 million in damages to the country's telecom
infrastructure, including transmission towers and switching equipment,
buildings, microwave towers, overhead cables, and 30 percent of all telephone
lines.

Since then, Bosnia-Herzegovina has made remarkable strides in recovering. The
European Bank for Reconstruction and Development created a special task force to
help Bosnia reconstruct its shattered infrastructure, and most of those
reconstruction plans are complete. The country is working toward membership in
the European Union, and it has liberalized several industries in order to
achieve that goal, including the telecommunications market. Its regulatory
agency has introduced number portability, allowed incumbent provided to expand
into other parts of the country, and lowered interconnection tariffs all in an
attempt to bolster competition.
The government also offered to sell 58 percent of Telekom Srbija in 2015. It
also offered to sell 48 percent of BH Telecom.

The market is technically open to competition, but the market is still dominated
by three incumbent telephone companies: BH Telecom, Telekom Srpske, and HT
Mostar. Together, they have 99 percent of the market. Telekom Srbija owns 64 percent of Telekom Srpske, which
was the country's most successful state-owned company, and the government is
thinking of selling some or all of its stakes in the other two companies as
well.

Bosnia and Herzegovina has 3.44 million mobile subscribers, meaning 90 percent of
the population has a mobile phone. The three regional operators all have their
own wireless divisions and are the only companies in the market. They are BH
Mobile, which is a division of BH Telecom; m:tel, the wireless division of
Telekom Srpske; and HT Eronet, a division of HT Mostar. None of the carriers
offer 4G service.

The country's economic and infrastructure problems have hampered the adoption of
the Internet. According to the International Telecommunications Union, 62
percent of the country is online but just 17
percent has a broadband subscription. The three incumbent
carriers provide most of the service.

Bulgaria

Bulgaria has an overall healthy telecommunications industry, largely thanks to a
booming wireless sector. The country's wireless penetration rate of 129 percent
is vastly larger than the fixed-line teledensity, which is just 23 percent. The
incumbent service provider did not start installing digital technologies in its
network until 1995, so while most people living in rural areas had access to
basic telephone service, the quality of that service was poor.

The government attempted to improve the quality of service in Bulgaria by
privatizing and liberalizing the telecommunications market. Vivacom, the
incumbent provider, has changed hands a few times and is now owned by a European
investment fund named Viva Telecom and led by Spas Roussev.

In 2014, the government revised its federal communications policy to give more
authority to the Communications Regulation Commission (CRC) so it complies with
guidelines from the European Commission. The revised policy requires the
country’s telecom providers to comply with CRC regulations even if they plan to
appeal them; current regulations allow companies to ignore CRC rulings if they
disagree with them and plan on appealing them in court.

Vivacom had a monopoly on all fixed-line services until 2005, when competitors were
allowed to start leasing wholesale access from it, but Orbitel, a subsidiary of
Deutsche Telekom, is the only legitimate player currently providing service.
Orbitel operates a 100-percent digital network that spans 35 cities in Bulgaria.

According to the International Telecommunications Union, Bulgaria had 9.1
million mobile customers at the end of 2015. There are four companies competing
in the country: M-Tel, a division of Telekom Austria, is the largest. The others
are Telenor, MAX, and Vivacom. Mtel, Telenor, and MAX offer 4G service,
and Telenor's LTE network covers 78 percent of the country's population. MAX
used to offer high-speed data over a WiMAX network but it started moving
customers over to LTE in November 2015.

According to the most recent info published by the ITU, 58 percent of the
country is online and 28 percent has a broadband Internet subscription.

Croatia

Croatia is another Eastern European country whose telecommunications
infrastructure was damaged by wars in the 1990s, but the country has bounced
back. According to the most recent information compiled by the ITU, Croatia had
a fixed-line teledensity of 37 percent.

The Croatian government overhauled the telecommunications industry in 2003 in
preparation to being accepted to the European Union. It consolidated two
regulatory agencies into a single governing body called the Croatian
Telecommunications Agency, liberalized the market, and privatized T-Hrvatski
Telekom (Croatian Telecom or HT), the former monopoly. The company is now owned
by Deutsche Telekom.

Croatian Telecom is still the leading player in the telecom market and it got
even larger when it announced plans to acquire Optima Telekom, its biggest
competitor, in April 2014.

According to the ITU, Croatia had 4.4 million wireless customers at the end of
2015, which translates to a penetration rate of 104 percent. There are three
companies operating in the market, and they all offer 4G services in addition to
having GSM technologies in their
networks. They are Hrvatski Telekom, a company owned by Deutsche Telekom; VIP,
which is owned by Telekom Austria, and Tele2. Tele2's 4G network covers 91
percent of the country's population.

Croatia has a broadband density rate of 23 percent. HTNet, a subsidiary of HT,
has the major market share, but there is some competition developing.

Czech Republic

The Czech Republic has an open and competitive telecommunications market. The
market is now overseen by an independent regulatory authority–Czech
Telecommunication Office– who has been lauded for promoting competition. As a
result, all sectors are open to competition, and major European companies like
Telefonica of Spain, Germany's Deutsche Telekom, and global wireless powerhouse
Vodafone have a presence there.

The fixed-line penetration rate is over 18 percent, and there is substantial
competition in this sector. The Czech government privatized Cesky Telecom, the
former monopoly service provider, in April 2005 by selling it to Telefonica, who
sold it to an investment group in 2014. It is still the leading provider of
fixed-line services and markets and will market itself under Telefonica's O2
brand until 2018.

The Czech Republic also has a healthy wireless sector. At the end of 2014, the
country had over 13 million customers and a density rate of 132 percent. There are
three carriers operating in the market. The current leader is T-Mobile, the
wireless subsidiary of Deutsche Telekom. It has just under six million customers. Ranking
second is O2, which is owned by PPF. It has 4.7 million customers. The third
biggest player is Vodafone, which has 3 million customers. All four offer 4G
service, and T-Mobile also has an LTE-A network.

The Czech Republic also has a healthy Internet sector; 80 percent of the country is
online and 27 percent subscribes to broadband Internet service.

Estonia

Estonia was the first of the Baltic republics to open its telecommunications
market to competition. The company started deregulating the industry in 2001,
three years before it was accepted into the European Union. As a result, there
is now competition in all parts of the market, and it has one of the most
developed telecommunications markets in Eastern Europe, with high density rates
for landline service, mobile telephones, and Internet access.

Elion Enterprises, the former monopoly service provider, is still the largest
player in the market despite facing competition for over a decade. This company
is now backed by TeliaSonera, the leading carrier in Scandinavia, and goes by
the name Telia Enterprises Limited. The only other major player in the market is
Starman, a cable operator whose network covers much of the country.

Estonia has a healthy wireless sector for its size, with 1.9 million customers and a
penetration rate of 149 percent. There are three companies competing there: Telia
Enterprises Limited, Elisa, and Tele2. All three operate GSM
networks and provide 4G service.

The Estonian government has made a major priority out of promoting Internet
access since the late 1990s, and the country has experienced strong growth as a
result. Eighty four percent of the population is online and 30 percent of the country have broadband connections. Elion
Enterprises has about half of the market, and customers have several options for
service within metropolitan markets.

Hungary

Hungary began liberalizing its telecommunications market in 2001, and the newly
opened market attracted investment from some of the biggest names in the
European market. One of the biggest companies to enter the market was Deutsche
Telekom, which purchased the incumbent service provider Magyar Telekom. Today,
the country has a fixed-line rate of 31 percent and Magyar Telekom is still the
leading provider of basic telephone service, although revenues have been
decreasing as customers move to wireless. The second largest fixed-line carrier
is the Hungarian Telephone and Cable Corporation (HTCC).

Hungary has the fourth largest mobile market in Eastern Europe in terms of
number of subscribers. There are 11.8 million wireless users, which puts the
penetration rate at over 119 percent. There are three carriers currently
operating in Hungary: Telekom, Telenor, and Vodafone. All three offer 4G
service. A fourth carrier named Digi.Mobil is also planning to enter the market
with its own 4G network.

Hungary has a broadband density rate of rate of 27 percent, but 77 percent of
the country uses the Internet. The leading
broadband providers are MTel, UPC Hungary, and DIGI.

Latvia

The Latvian telecommunications market has gone through two rounds of
regulatory change since it received its independence from the former Soviet
Union. The country implemented the European Union’s guidelines for a liberal
telecom market in 2002 as a condition of being accepted into the group two years
later. However, the country was criticized several times for not effectively
regulating the market and promoting competition. In April 2009, the European
Commission began investigating the Latvian government for not doing all it could
to promote a level playing field in the telecom market, and in June of the same
year, the EC began legal action against the country for failing to properly
manage wireless spectrum. As a result, the country implemented what it called
the New Regulatory Framework in 2011.

Lattelekom, the incumbent service provider, had its monopoly lifted in 2003,
but it is still the dominant player in the fixed-line market. TeliaSonera owns
49 percent of the company, while the Latvian government owns the remaining 51
percent. In January 2014, reports surfaced in Bloomberg that a Russian company
named Sistema was interested in acquiring part of the government’s stake in the
company, although the government denied interest in selling any of its interest
and no deal has since been mentioned. Other major competitors are CSC Telecom;
Latvenergo, a state-owned energy company; and Latvijas Dzelzcels, a state-owned
railway.

While


Latvia

has a poor fixed-line infrastructure, wireless technologies have taken off. The
country now has 2.6 million wireless customers, a penetration rate of 128
percent. There are four companies operating in Latvia, but recent subscriber
data is not available. They are LMT, Tele2, BITE Latvija,
and Tritel. Triatel uses CDMA technologies, while the other three have GSM
networks and offer 4G service. LMT even offers LTE-A service
in the capital. The Latvian government explored merging LMT and Lattelekom into
a single company but announced in April 2016 that it was abandoning those plans.

According to the ITU, 25 percent of the country has broadband
Internet connections.

Lithuania

Lithuania has a fixed-line penetration rate of 19 percent, and the government
has been making recent upgrades to the existing infrastructure in order to
provide better service. The upgrade process was largely being led by TEO, the
former monopoly provider who announced a series of multi-million dollar network
investments with the goal of becoming the most modern network in the Baltic
region. More specifically, the company has upgraded over 90 percent of its
network to digital technologies.

In 2017, TEO merged with Omnitel to become Telia Lithuania. According to data compiled by
International Telecom Intelligence, the combined company dominates the national
market with 95.7 percent of the fixed-line sector, despite having its monopoly lifted in 2003.
Tele2 was the second largest fixed-line operator, but the company is
reevaluating its strategy in

Lithuania

since attempts to steal market share from the former monopoly have fallen
short. This is an unforeseen turn of events for Lithuanian regulators who,
in July 2013, lifted all service obligations on TEO LT because it felt there is ample
competition in the market. Developments since this time would seem to suggest
otherwise.

Like
many countries in
Eastern Europe, wireless technologies have taken off and filled the gap left by a lagging
fixed-line market. Today, mobile phones substantially outnumber landlines,
and there are 4.1 million mobile customers for a penetration rate of 140
percent, which is one of the highest in Eastern Europe. There are now four
companies competing in the market: Tele2, BITE, MEZON, and the newly formed
Telia Lithuania.

All of them offer 4G service, and Telia Lithuania and BITE both launched LTE-A
in 2015. Bite's 4G network covers 90 percent of the population, while Tele2's
covers 95 percent.

Lithuania

has a healthy Internet sector compared to the rest of the region. According to
the most recent information compiled and published by the ITU, the country had
833,000 broadband customers at the end of 2015, a 28-percent penetration rate.

Macedonia

Macedonia
has a fixed-line teledensity of just 18 percent. This figure is low because
Macedonia inherited an antiquated telecommunications system after it gained its
independence from Yugoslavia.

The Macedonian government has faced harsh criticism for not doing all it can
to foster a truly competitive environment. The government receives millions of
dollars in dividends from MakTel (Makedonski Telekom), the incumbent service
provider, which are essentially described as bribes to keep the competitive
landscape slanted in the former monopoly’s favor. Some carriers who have tried
to introduce VoIP calling as a cost-effective alternative have complained that
MakTel has interfered with their ability to provide service. As a result of
these investigations, the Macedonian government announced plans to further
privatize MakTel so it could focus more of its resources on regulating the
industry. The government wants to sell another 45.1 percent of the company.
Deutsche Telekom, who already owns 51 percent, expressed interest in purchasing
another ten percent and has proposed merging MakTel with T-Mobile.

As
the government moves forward with privatization plans, MakTel continues to
provide nearly all of the country’s telecom services, including local, long
distance, and wireless services. On.net, a Macedonian ISP, was the first company
to sign an interconnection agreement with MakTel after the market was open to
competition in 2005. The company launched service in January 2007 and is now the
only competition.

Macedonia
has 2.1 million wireless customers–a penetration rate of 99 percent.
There
are two companies providing service: Telekom, which is owned by a subsidiary of
Deutsche Telekom, and one.VIP, which is owned by Telekom Austria and Telekom
Slovenije. Both of them provide 4G service.

The
Macedonian government has been working with the US Agency for International
Development to deploy Wi-Fi hotspots throughout the country to circumvent Maktel
and bring Internet access to the people. The progress from this initiative has
been remarkable. This network covers 95 percent of the country and is one of the
largest Wi-Fi networks in the world. According to the ITU,

Macedonia

has a broadband density rate of 17 percent, and 68 percent of the population is
online.

Montenegro

Montenegro
declared its independence in June 2006. The country has a modern
telecommunications system and a fixed-line teledensity of 26 percent. The market is still a monopoly dominated by Crnogorski Telekom, which is now majority owned by Magyar Telekom, the incumbent
telecommunications carrier of

Hungary

and a subsidiary of Deutsche Telekom. Deutsche Telekom invested 26.7 million
euros in 2011 into the country’s fixed-line infrastructure.

Mobile
technologies played a critical role in getting

Montenegro

‘s telecommunications sector up and running after years of war. As a result, the
market has thrived, and
Montenegro
now has one of the highest mobile penetration rate in
Europe at 162
percent. The three wireless operators there are Telenor, Telekom, and m:tel. All three operate GSM, GPRS, EDGE, and UMTS networks, while Telenor and
Telekom also offer 4G service. The government is reportedly
interested in issuing a third license, and while it has not announced any
formal plans, companies from Russia and Italy have both expressed interest.

According
to the most recently available data, 61 percent of the country uses the Internet, and
Montenegro
has a 18 percent broadband subscription rate.

Poland

The
Polish telecommunications market is the largest in
Eastern Europe
, but there is still a large digital divide for even the most basic telephone
services.

Poland

has a fixed-line teledensity of 24 percent. Rural teledensity remains poor, and hundreds of rural communities
throughout the country have no access to telephone service. Not only is

Poland

‘s telephone system underdeveloped and outmoded, but its telecommunications
industry has also been hurt by various legal disputes requiring international
arbitration. According to information gathered by the Global Technology Forum,
fixed-line telephone calls made in
Poland
are among the highest in
Europe.

Despite these problems, the telecommunications sector is
fully deregulated and quite active. TPSA, the former state-owned monopoly, is
now owned by France Telecom and uses the Orange brand name. It is still the
leading service provider. Other major
providers in the fixed-line market are Netia, Telefonia Dialog, and Tele2.

Poland
has nearly 55
million mobile customers, which puts the penetration rate at 143 percent and
makes it one of the largest wireless markets in
Eastern Europe. After some consolidation, there are four carriers
operating in the country, and competition is fierce between
them. The current market leader is Orange. It has 16.3 million customers, and
its 4G network reaches 90 percent of the country. The
second largest player is Play. It has 14.2 million customers. The company's two
primary stakeholders have expressed interest in selling the company but put
those plans on hold in early 2016 after they could not agree on how to do it.

 T-Mobile has 12
million customers using its GSM, LTE, and LTE-A networks, and its 4G network
covers 92 percent of the population. Plus has 11.7
million million. All four carriers offer LTE and LTE-A service.

Poland
has nearly six

million Internet subscribers. Today, nearly 19 percent of the population
has a high-speed connection. Growth has been historically thwarted by the fact that prices of PCs put them
beyond the reach of the average Polish household. Despite cost and availability
problems, Internet usage has managed to grow rapidly in

Poland

, benefiting from the central switch digitalization, increased ISDN availability
in major cities, and the general increase in installed lines.
Not surprisingly,
Internet usage is concentrated in large metropolitan areas, with a large
percentage of users gaining access through a university or other institution.

Orange has been investing in its fiber-optic network in order to make
broadband service more accessible, particularly in the eastern part of the
country.

Romania

Telephone
service in

Romania

is still very underdeveloped. The fixed-line teledensity is just
20 percent,
and many villages do not have any form of telephone service. The infrastructure
in

Bucharest

and other major cities is fairly modern, but most of the country receives
service over a dated network.
Romania
‘s telecommunications system has been deregulated, expanded, and modernized to
a great extent over the past 15 years, largely so

Romania

could gain acceptance into the European Union, which it received in January 2007.

The
market was liberalized in January 2003, when the Romanian government ended the
monopoly held by T-Mobile, which is owned by Deutsche Telekom's Greek operation, OTE.
The Greek company’s involvement in the Romanian telecom sector is expected to
help modernize the market. According to the Greek Deputy Foreign Minister, the
Hellenic Telecommunications Organization has already invested one billion euros
in

Romania, and it is slated to invest another 500 million euros in
Telekom Romania Communications, which
still has 85 percent of the fixed-line market. At the same time, OTE’s
wireless division plans to invest 400 million euros in the country.

The
Romanian government has tried several times to sell its remaining 46 percent stake in
Telekom Romania Communications
in order to attract more investment in the telecom sector. Those plans were
put on hold in December 2006 after a high-ranking official at Credit Suisse bank
was arrested for leaking documents related to the sale to prospective buyers,
and the government put the plans on hold again in late 2015 after they could not
agree on a strategy to market the company.

Mobile
telecom density stands at around 107 percent, and there are 23.1 million
customers. There are four companies competing in the wireless sector, although
three of them are clearly leading the way. The current market leader is

Orange, the wireless division of France Telecom that is a
major player in several European markets. It has 11.1 million customers. Vodafone, one of the world’s largest wireless carriers, is in second place, with
8.4 million customers. Telekom, a venture between OTE and Romtelecom, has 5.9
million customers. Digi.Mobil, a pure play 3G and 4G provider, is the smallest, with
2 million customers. All four offer 4G service.

Romania has four million broadband subscribers, which is a density
rate of 20 percent. The main service providers are RomTelecom, ROMPAC, LOGICNet, Sprint, and the Academic
data network. Deployment of the Internet through the cable television delivery
system is in progress.

Serbia

The telecommunications infrastructure in Serbia was heavily damaged during the Kosovo war,
but the market has recovered and the fixed line teledensity for Serbia is now
at 37 percent. There are also several fiber roll outs scheduled. A 600-km
stretch of fiber-optic cable link to
Hungary
and
Bulgaria
has connected

Yugoslavia

with the European telecommunications network. Fiber-optic links from
Belgrade
to the Romanian border and to the Greek
island
of
Corfu, via the Montenegrin

port
of
Bar, are planned.

Telecom Serbia's monopoly on all fixed-line services ended in June 2005, and Telenor
has a license to operate in the country. Telecom Serbia has also been partially privatized; OTE owns 20 percent while
the remainder is split between the Serbian government, former employees of
Telekom Srbija (6.94 percent) and the citizens of serbia (14.95 percent). The government initially wanted to sell the rest of its stake
in 2016, but it rejected all six bids that it received for the company. The
Serbian government said it will restructure Telecom Serbia now that it is
retaining ownership, but it has not yet provided any details.

The
Serbian wireless market has grown quickly. There are now about 9.2 million
customers, and the penetration rate is 125 percent. There are three carriers
currently providing service: mts, which is backed by Telekom Srbijia; Telenor;
and VIP, a division of Telekom Austria. All three companies have GSM, LTE, and
LTE-A networks.

The
ITU reports that Serbia has 1.32 million broadband subscribers, which is 17 percent of
the population.

Slovak Republic

The Slovak Republic has a strong telecommunications sector. Wireless services
have played a huge role in helping the company establish a high teledensity for
the region. The country has a fixed-line teledensity of 16 percent, while the
wireless teledensity is 122 percent.

The Slovak government started opening the telecom sector to competition in
1998, and the market was completely opened in 2005 when the monopoly on
fixed-line services ended. The former monopoly provider is Slovak Telekom, and
the company is now 100 percent owned by Deutsche Telekom after the company
purchased the remaining 49 percent formerly owned by the Slovak government in
2015. There
are 6.6 million wireless customers in the

Slovak

Republic, which puts the density rate at 122 percent, and there are four carriers providing
service.

They are Orange , Slovak Telekom , O2
, and 4ka. All of these
carriers offer 4G service.

The Slovak Republic has a high-speed Internet subscription rate of
23 percent, and 81 percent of the population uses the Internet.

Slovenia

Slovenia
is one of the
most economically prosperous countries in Eastern Europe, and the country’s good
fortunes are reflected in a progressive telecom sector that is on par with some
of the countries in
Western Europe. The country already had an advanced infrastructure in place when the
government implemented a new Telecommunications Act in 2001 that opened the door
to competition.

Slovenia
has a fixed-line teledensity of 36 percent, which is the second highest in the
region. Telekom Slovenije is the former state-owned monopoly.
It has been operating in a competitive environment since 2001, but it still
maintains a dominant position in the market. There have been some complaints
from the international community that the Post and Electronic Communications
Agency has not done all it could to make it easier for competitors to launch
service. Most of these complaints argue that Telekom Slovenije is still majority
owned by the

Slovenia

government, so there is little incentive to foster competition. To date, there
are no other major players in the fixed-line sector. 

Slovenia

has about 2.4
million mobile customers, which places the penetration rate at 113 percent.
There are four companies providing service in the country: Telekom Slovenije,
Si.mobil, Telemach, and T-2. All of them except T-2 offer 4G service.

About 72 percent of the population uses the Internet and 28 percent
are broadband Internet subscribers.

In comparison with
Europe, most information-telecommunications technology indicators put

Slovenia

at the European average and it excels in the spread and penetration of personal
computers as well as its openness to adopting new technologies.

Ukraine

There
is a direct correlation in many Eastern European countries between the a
country’s economy and the state of the telecommunications market.

Slovenia

has a solid economy, and the telecommunications market is one of the most
advanced in the region. Meanwhile,

Ukraine

has a dismal economy and the telecommunications industry has suffered. The
country has made upgrading the network a major priority, and there has been
remarkable progress.

Ukraine
has a fixed-line teledensity of 22 percent. The state telecom company, Ukrtelecom, controls more than half of the international communications channels
and practically all of the local telephone service. Ukrtelecom subscriber
charges for basic telephony services are more than five times higher than in
neighboring countries. The company is still 100
percent owned by the

Ukraine

government. Utel, the long distance and international carrier, is fully owned
by Ukrtelecom.

There
are 60.72 million wireless subscribers in the

Ukraine, and the wireless penetration rate is
144 percent. The market recently went through a wave of consolidation and there
are now six companies operating here: Kyivstar, Vodafone, lifecell, Intertelecom,
TriMob, and PEOPLEnet. In March 2014, Reuters reported that some of the Ukraine's mobile
telecom equipment that was stored in Crimea was destroyed after Russia seized
the region.

Ukraine

has a poor Internet market. Only nine percent subscribe to broadband service,
and 12 percent use the Internet.

Market Leaders

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Eastern Europe has a large
number of telecommunications firms, many of which have
substantial outside investment. Major investors in the
region include Deutsche Telekom, OTE, Telenor, France Telecom, and
TeliaSonera. The companies differ widely in
size, as well as in level of privatization. Table 3
provides the names of the legacy phone companies,
regulatory agencies, cellular providers and other major
carriers in these countries.

Market Trends

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The
countries of Eastern Europe
have undergone their own individual plans to improve telecommunications. They
have done so with help from companies in Western Europe and North America, regional and international investment groups, the Organization for Economic
Cooperation and Development (OECD), and other entities that provided financial
support and spearheaded the construction of new regional networks. The
Trans-European Telecommunications Network (TET) is a regional networking effort
that links Scandinavia with Africa and the Middle East via Eastern and Central Europe. The Managed European Transmission Network (METRAN) aims to link members of the
European Conference of Postal and Telecommunications Administrations to a
pan-European fiber-optic telecommunications network. The Trans-European Link
(TEL) is an international fiber-optic telecom network.

Many
Eastern European countries have made good progress in liberalization,
particularly those that have entered or seek to enter the EU. Currently, Bulgaria,
Croatia, the
Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia are all members. In addition, Croatia and Macedonia are listed as
official candidate countries, while Albania, Bosnia and Herzegovina, Montenegro,
and Serbia have all expressed interest in joining. Belarus
and Ukraine, who are not members, have proven particularly resistant to privatization. New
EU entrants need firm regulators and solid telecommunications laws that assure
number portability and interconnection at a profitable rate. Regulatory concerns
are still slow in being solved, but governments are starting to pay closer
attention to these concerns.

Even
with the lack of effective regulation, the telecommunications sector in Eastern Europe
has certainly expanded. In much of the area, however, it is starting from a
very low level. The conflicts in the Balkans have wreaked havoc with the
infrastructure in those countries affected, and they will continue to require
significant external investment.

Several
countries have tried to privatize their incumbent telecommunications carriers as
a way to foster competition and attract investment to help upgrade the poor
fixed-line infrastructure that is present in several Eastern European countries.
Countries like Romania have struggled to bring these plans to fruition. The following table shows how
the fixed-line penetration rate has changed over the last five years in the
Eastern European countries.

Even with the lack of
effective regulation, the telecommunications sector in
Eastern Europe has certainly expanded. In much of the
area, however, it is starting from a very low level. The
conflicts in the Balkans have wreaked havoc with the
infrastructure in those countries affected, and they will
continue to require significant external investment.

Several countries have tried to privatize their incumbent
telecommunications carriers as a way to foster competition and attract
investment to help upgrade the poor fixed-line infrastructure that is
present in several Eastern European countries. Progress has been minimal
in several countries, and it has even decreased in Belarus, Bulgaria,
Croatia, the Czech Republic, Hungary, Latvia, Lithuania, Macedonia, the Slovak Republic,
and Ukraine. While there has not been much
growth in the fixed-line market, there has been explosive advances in the mobile
sector. Wireless telephones account for more than half of all telephones in
every country in Eastern Europe. The
following chart compares the state of the wireless sector to the fixed-line one.
In every country, the wireless market is vastly larger.

Figure 2. Landline and Wireless Penetration Rates for Eastern Europe, 2015

Source: ITU

The
Internet grows with the fixed telecom market and is relatively easy to enter. Up
to now, poor infrastructure and limited local access have adversely affected
Internet take-up rates, and usage has been characterized by low availability,
intermittent service, and high prices. Users typically pay a per-minute fee for
connection time. To increase affordability, many ISPs have begun charging a
reduced rate for low-traffic, nighttime use. As local access infrastructures in
each country have expanded to reach and capacity, so too will Internet
availability and usage.

Broadband technologies are still struggling to
gain a foothold in several markets, and penetration rates vary from country to
country. The following table shows the broadband penetration rates for the
Eastern European countries.

Figure 3. Broadband Penetration Rates, Eastern Europe, 2015

Source: ITU

According to the Organization for Economic Cooperation
and Development (OECD), the average broadband penetration rate for its
34 member countries is 26 percent. There are six countries covered in this
report in the OECD: Slovenia, Estonia, Hungary, the Czech Republic, the
Slovak Republic, and Poland. While the market still has a long way to go, there
has been rapid growth in these areas, and competitors have been able to
make some progress in the broadband sector.

Strategic
Planning Implications

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While the telecom industry
is improving in Eastern Europe, a number of countries in
the region are still struggling with low foreign
investment, obsolete technologies, and counterproductive
policies. In addition to this, ongoing conflicts in several countries in
the region, as well as recent turmoil (with the Russia/Ukraine being a
standout example) have negatively impacted new development and recovery
efforts.

As a direct result of
these challenges, a wide range of fixed telecom line
densities can be found in Eastern Europe. Following the
fall of communist regimes in 1989, the telecommunications
sector in Eastern Europe attracted unprecedented levels
of foreign investment. The large sums of investment
dollars flooding the region assisted in the development
of fixed-line infrastructure. These developments were
also been accompanied by a move toward modernization and
liberalization. Before Eastern Europe can take the next
step in its developmental process, however, it must focus
on institutional and regulatory reforms. Needed reforms
include opening up of different divisions of the telecom
sector, encouraging more private investment, and
privatizing state monopolies.

This is not to say that
all the countries in the region have had difficulty
meeting the challenge of modernizing the
telecommunication industry. On the one hand, Slovenia has
achieved levels of mobile and Internet penetration that
surpass those of several Western European countries. On
the other hand, some countries in the region have total teledensities of less than 20 percent.

The Eastern Europe telecom
market is a fragmented one. Unless this problem is
remedied, development in the region will be impeded. The
countries making up this region should therefore make a
priority of integrating their markets. The natural focus
of any integration effort is, and has been, the European
Union. Requirements for membership, which include
regulatory reform have placed telecom reform high on the
agenda, and this is beginning to have an effect.

Web Links

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Regulatory Agencies

• Albania Electronic and Postal Communications Authority (AKEP): http://www.akep.al/en/
• Belarus Ministry of Posts and Telecommunications: http://www.mpt.gov.by/en/
• Bosnia and Herzegovina Communications Regulatory Agency of Bosnia-Herzegovina:http://rak.ba/eng/
• Bulgaria Communications Regulation Commission (CRC): http://www.crc.bg
• Croatia Croatian Post and Electronic Communications Agency (HAKOM): http://www.hakom.hr
• Czech Republic The Czech Telecommunication Office: http://www.ctu.eu/
• Estonia Estonian Competition Authority (ECA): http://www.konkurentsiamet.ee/?lang=en
• Hungary National Media and Infocommunication
  Authority (NMHH): http://english.nmhh.hu/
• Latvia Elektronisko Sakaru Direjcija (ESD):
  http://www.vases.lv/
• Lithuania Communications Regulatory Authority
  (RRT): http://www.rrt.lt/en/home.html
• Macedonia Electronic Communications Agency
  (AEK): http://www.aek.mk/en/
• Montenegro Agency for Electronic
  Communications and Postal Services:
  http://www.ekip.me/eng/
• Poland Prezez Urzedu Komunijacji
  Elektronicznej (UKE): https://www.uke.gov.pl/
• Romania National Authority for Management and
  Regulation in Communication of Romania (ANCOM):
  http://www.ancom.org.ro/en/
• Serbia Republic Agency for Electronic
  Communications (RATL): http://www.ratel.rs/
• Slovak Republic Telecommunications Regulatory
  Authority of the Slovak Republic (TUSR):
  http://www.teleoff.gov.sk/
• Slovenia Agency for Communication Networks
  and Services of the Republic of Slovenia:
  www.akos-rs.si/akos-ang/
• Ukraine National Communication for the State
  Regulation of Communications and Informitization:
  nkrzi.gov.ua/

Telecom Carriers

• Albtelecom: http://www.albtelecom.al/al/
• AMC: http://www.amc.al/
• Beltelecom: http://www.beltelecom.by/en
• BH Mobile:
  https://bhmobile.bhtelecom.ba/
• BITE Latvija: http://www.bite.lv/
• Eagle Mobile: http://www.eaglemobile.al/
• Elion: https://www.elion.ee/eraklient
• Elisa: http://corporate.elisa.com/
• EMT: https://www.emt.ee/
• HT Eronet: http://www.hteronet.ba/
• Intertelecom: http://www.intertelecom.ua/
• Kyvivstar:
  http://www.kyivstar.ua/en/kr/mm/
• Lattelecom: http://lattelecom.lv/en/
• Life :): http://en.life.com.by/
• LMT: http://www.lmt.lv/lv
• m:tel: http://www.mtel.ba/
• Macedonian Telecom:
  http://www.telekom.mk/mk/
• Magyar Telekom:
  http://www.telekom.hu/about_us
• MAX: https://www.maxtelecom.bg/en
• MEZON: http://www.telecentras.lt/
• MTS: http://www.mts.by/
• O2: http://www.o2.com/
• Orange: http://www.orange.com/
• OTE: https://www.ote.gr/
• PEOPLEnet: http://www.people.net.ua/
• Play: http://www.play.pl/en/
• Plus: http://www.plus.pl/
• Romtelecom: https://www.telekom.ro/
• Si.mobil: https://www.simobil.si/
• Slovak Telekom:
  https://www.telekom.sk/english/
• SWAN: https://www.swan.sk/en/about-us
• T-Hrvatski Teleckom: http://www.t.ht.hr/eng/
• T-Mobile: http://www.t-mobile.com/
• Tele2: http://www.tele2.com/
• Telefonica O2:
  http://www.telefonica.com/en/home/jsp/home.jsp
• Telekom Romania: https://www.telekom.ro/
• Telekom Slovenije: http://www.telekom.si/en
• Telekom Srbjia: http://www.telekom.rs/
• Telenor: http://www.telenor.com/
• Teo LT: https://www.teo.lt/
• Triatel: http://www.triatel.lv/
• Tusmobil: http://www.tusmobil.si/en
• Velcom: http://www.velcom.com/
• Vivacom: https://www.vivacom.bg/
• Vodafone:
  http://www.vodafone.com/content/index.html
• Vrvatski Telekom: https://www.hrvatskitelekom.hr/

About the Author

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Michael Gariffo is
an editor for Faulkner Information Services. He tracks and writes about
enterprise software and the IT services sector, as well as telecommunications
and data networking.

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