Strategic Opportunities for Telcos Across Europe
The combined Western European and Central and Eastern European telecommunications markets reached $245 billion in 2003. According to a new IDC study, this figure is expected to reach $281 billion by 2008, as a combination of new fixed and mobile access products emerge on the
market. Continuing privatization and liberalization, especially in the fixed-line arena, should spur increased competition and make data, Internet,
and other telephony services more widely available to home and business end users throughout the newly enlarged EU.
As might be expected, Western Europe accounted for the lion's share of the revenue due to the size of its population and its head start with
fixed-line infrastructure. For instance, according to the new study, PSTN/ISDN penetration in Western Europe is nearly 60%; in the new EU member states of Central and Eastern Europe, it hovers around 30%. Along these same lines, broadband connections in Western Europe outnumber those in the new member states by more than 25 times, resulting in a household penetration rate that is around 4.5 times greater.
"With Central and Eastern European markets, it's important to realize that they are growing rapidly, especially with regards to mobile as well as
Internet and data services," said Jill Finger Gibson, research manager, European Telecommunications Services, IDC EMEA. "Nevertheless, most CEE countries still have a way to go, which should translate into opportunities over the next few years."
This rapid development of telecommunications services in Central and Eastern Europe will likely prove one of the more beneficial aspects of EU
membership to mobile providers in the new EU. CEE end users increasingly rely on mobile phones for not only voice calls but also other types of telecommunications, like data transfer and Internet access. This has created substantial opportunities for operators to market and test access services, especially WLAN and GPRS as well as newly arrived technologies like EDGE and UMTS.
"The mobile market will continue to be one of the hottest areas in Central and Eastern Europe," said John Gole, program manager, Communications, IDC
CEMA. "A number of the smaller countries have mobile penetration rates exceeding most Western European countries, making them well suited for trying out both the marketability and functionality of different mobile services before developing them further west. This is also true of fixed-line services, but to a lesser degree, as the infrastructure is not as established in the east."
CEE also provides other potential benefits to international vendors. The region's highly educated and motivated workforce and lower labor costs make
CEE countries ideal for establishing both business and manufacturing hubs. Also, EU membership has created opportunities for cross-border mergers and acquisitions in what have been, up to now, very nationally focused markets. While this would generate some additional revenue for international providers, more importantly, it would allow them to establish a foothold for expansion further east.
"In terms of telecommunications use and business culture, new member states are still positioned between Western Europe and Eastern Europe," said
Gole. "This makes them natural transition points for international players seeking to eventually expand into countries like Romania, Serbia, and Ukraine, all potentially very lucrative markets."
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