REGIONAL FORECAST REPORT CENTRAL AND EASTERN EUROPE TELECOMS MARKET: INTERIM FORECAST UPDATE (16 COUNTRIES) 2016 2021 JULIA MARTUSEWICZ -KULINSKA, ROMAN ORVISKY and WILLIAM HARE
About this report This report provides: an interim update of our 5-year forecast (previously published in September 2016) of more than 345 mobile and fixed KPIs for Central and Eastern Europe, as a whole and for 16 key countries 1 an explanation of the significant changes in this edition, compared with our previous forecasts. Revisions to our previous forecasts occurred mainly for the following reasons: market developments based on recent market events and the latest reported operator and regulator data (2Q 2016) changes to the competitive and regulatory environment changes to the macroeconomic outlook and exchange rates used to derive revenue in constant EUR changes to historical data because of newly available information. For the complete data set, see the accompanying Excel file at www.analysysmason.com/cee-interim-forecast-jan2017. Geographical Regions modelled: Central and Eastern Europe (CEE) Countries modelled individually Bulgaria Croatia Czech Republic Estonia Hungary Latvia Lithuania Montenegro Poland Romania Russia Serbia Slovakia Slovenia Turkey Ukraine REPORT COVERAGE Key performance indicators Connections Mobile Handset, mobile broadband 1, IoT 2 Prepaid, contract 2G, 3G, 4G, 5G Smartphone, non-smartphone Fixed Voice, broadband, IPTV, dial-up Narrowband voice, VoBB DSL, FTTP/B, cable, BFWA, other Voice traffic Fixed and mobile Outgoing minutes, MoU Revenue Mobile Service 3, retail Prepaid, contract Handset, mobile broadband 1, IoT 2 Handset voice, messaging, data Fixed Service 3, retail Voice, broadband, IPTV, dial-up, BNS DSL, FTTP/B, cable, BFWA, other ARPU Mobile: SIMs, handset Prepaid, contract Handset voice, data 1 For more information, see Analysys Mason s Central and Eastern Europe telecoms market: trends and forecasts (16 countries) 2016 2021. Available at www.analysysmason.com/cee-telecoms-forecast- Sep2016-RDDF0/. 1 Includes USB modem, and mid- and large-screen, but not handset data. 2 IoT connections and revenue figures include mobile services only. 3 Service revenue is the sum of retail and wholesale revenue. 2
Contents 5. Executive summary and regional forecasts 6. Mobile handset data revenue in Central and Eastern Europe will drive telecoms revenue and the decline of fixed revenue will slow down 7. Smartphones and 4G/5G: The rate of smartphone take-up in CEE will be fast, including those countries with slower LTE network deployments 8. Fixed services: Fixed broadband household penetration will reach 61%, and NGA technology will account for 78% of FBB lines in CEE by 2021 9. Key regional changes since our previous forecast: fixed broadband and IPTV revenue has been revised up, while voice revenue erosion continues 10. Key regional changes since our previous forecast: fixed broadband and IPTV revenue has been revised up, while voice revenue erosion continues 11. Individual country forecasts 12. Czech Republic: The revenue forecast is more optimistic, thanks to significant improvements in the mobile market 13. Poland: A decline in mobile broadband revenue will be slower, despite government plans to support fixed broadband roll-outs 14. Russia: A poorly performing mobile market forces a downward revision of the forecast 15. Turkey: 4G take-up will be faster than anticipated and 5G services are expected to be launched during the forecast period 16. About the authors and Analysys Mason 17. About the authors 18. About Analysys Mason 19. Research from Analysys Mason 20. Consulting from Analysys Mason 3
List of figures Figure 1: Telecoms and pay-tv retail revenue by service type and total service revenue (retail and wholesale), new and previous forecasts, Central and Eastern Europe, 2011 2021 Figure 2: Smartphones as a percentage of handsets, and 4G/5G s share of total connections (excluding IoT), Central and Eastern Europe, 2015 and 2021 Figure 3: Fixed broadband connections by type, and fixed voice, IPTV and mobile broadband connections, Central and Eastern Europe, 2011 2021 Figure 4: Summary of major changes compared with our previous forecast for Central and Eastern Europe Figure 5: Telecoms retail revenue forecast by service type and total service revenue, previous and new forecasts, Central and Eastern Europe, 2016 and 2021 Figure 6: Telecoms retail revenue by service type, total service revenue and growth rates, Central and Eastern Europe, 2015 and 2021 Figure 7: Connections by type, and growth rates, Central and Eastern Europe, 2015 and 2021 Figure 8: Telecoms retail revenue by service type, and total service revenue (retail and wholesale), new and previous forecasts, Czech Republic, 2011 2021 Figure 9: Summary of major changes compared with our previous forecast, Czech Republic Figure 10: Telecoms retail revenue by service type, and total service revenue (retail and wholesale), new and previous forecasts, Poland, 2011 2021 Figure 11: Summary of major changes compared with our previous forecast, Poland Figure 12: Telecoms retail revenue by service type, and total service revenue (retail and wholesale), new and previous forecasts, Russia, 2011 2021 Figure 13: Summary of major changes compared with our previous forecast, Russia Figure 14: Telecoms retail revenue by service type, and total service revenue (retail and wholesale), new and previous forecasts, Turkey, 2011 2021 Figure 15: Summary of major changes compared with our previous forecast, Turkey 4
Bulgaria Croatia Czech Republic Estonia Hungary Latvia Lithuania Montenegro Poland Romania Russia Serbia Slovakia Slovenia Turkey Ukraine CEE total Percentage of handsets Percentage of connections Central and Eastern Europe telecoms market: interim forecast update (16 countries) 2016 2021 Smartphones and 4G/5G: The rate of smartphone take-up in CEE will be fast, including those countries with slower LTE network deployments Figure 2: Smartphones as a percentage of handsets, and 4G/5G s share of total connections (excluding IoT), Central and Eastern Europe, 2015 and 2021 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Smartphones: 2015 2021 4G/5G 2015 2021 Source: Analysys Mason CEE s share of 4G/5G connections will reach 51%, and will surpass 70% in eight countries by 2021. Smartphone take-up will not be delayed by lower LTE coverage in Romania and Ukraine, and smartphone penetration will exceed 85% in 11 countries by 2021. Estonia, Lithuania and Turkey will have the highest smartphone penetration in CEE, at around 95% in 2021. In Estonia and Lithuania, high LTE coverage will support smartphone take-up. In Turkey, strong demand for smartphones will be satisfied by the availability of an increasing number of affordable handsets in the market, which will drive up smartphone penetration, despite a relatively low number of LTE connections (due to the delayed launch of 4G). The only CEE country where 4G is not yet accessible is Ukraine (as of December 2016), but it is expected to become available in 2017. Ukraine accounts for the lowest smartphone penetration in the region, but we expect this to reach 69% in 2021. 7
CONTENTS EXECUTIVE SUMMARY AND REGIONAL FORECASTS INDIVIDUAL COUNTRY FORECASTS ABOUT THE AUTHORS AND ANALYSYS MASON 16
About the authors Julia Martusewicz-Kulinska (Senior Analyst) is a member of the regional markets research team, contributing mainly to the European Core Forecasts, Telecoms Market Matrix and European Country Reports programmes. She has more than 14 years of research and telecoms industry regulations experience. Prior to joining Analysys Mason, she worked for the Polish national regulatory authority as the head of the Research Division, where she was responsible for telecoms market research, and as the leader of the Telecommunications Market Analysis Department, which was accountable for co-operation between the regulatory authority and the Information Society and Media DG of the European Commission. William Hare (Senior Analyst) is the leader of Analysys Mason s Telecoms Market Matrix research programme, which tracks and compares telecoms metrics and market shares for all the major fixed and mobile operators in Europe. He also leads the European Country Reports programme, which provides insightful reports on 30 European telecoms markets. He is a key contributor to our European Core Forecasts and Global Telecoms Forecasts programmes, specialising in business and market modelling and data analysis. William joined Analysys Mason s Research practice in 2010 after 3 years as a consultant in our Consulting practice, working directly with clients in Asia, Africa and Europe. He read mathematics at the University of Cambridge. Roman Orvisky (Research Analyst) is a member of the regional markets research team in London, contributing to the Telecoms Market Matrix, European Core Forecasts, European Country Reports and Global Telecoms Forecasts programmes. Prior to joining Analysys Mason in November 2014, he worked in the Transaction Services department of the Royal Bank of Scotland in a customer experience internship role. During his studies, Roman focused on consumer behaviour in an online context, and has experience in churn modelling in the telecoms sector, social network analysis and browsing data analysis. Roman holds a Bachelor s degree in business from Durham University, and an MSc in marketing research from the Tilburg University School of Economics and Management. 17
Analysys Mason s consulting and research are uniquely positioned Analysys Mason s consulting services and research portfolio Digital economy Enterprise and IoT Regional markets Consumer services Telecoms software and networks Regulation and policy Transaction support Strategy and planning CONSULTING We deliver tangible benefits to clients across the telecoms industry: communications and digital service providers, vendors, financial and strategic investors, private equity and infrastructure funds, governments, regulators, broadcasters, and service and content providers. Our sector specialists understand the distinct local challenges facing clients, in addition to the wider effects of global forces. We are future-focused and help clients understand the challenges and opportunities that new technology brings. RESEARCH Our dedicated team of analysts track and forecast the different services accessed by consumers and enterprises. We offer detailed insight into the software, infrastructure and technology delivering those services. Clients benefit from regular and timely intelligence, and direct access to analysts. 18
Research from Analysys Mason We provide dedicated coverage of developments in the telecoms, media and technology (TMT) sectors, through a range of research programmes that focus on different services and regions of the world. Network Investment Strategies Network Traffic Spectrum Mobile Services Mobile Devices Fixed Broadband Services Convergence Strategies Video Strategies Enterprise and IoT Large Enterprise Voice and Data Connectivity Large Enterprise Emerging Service Opportunities Small and Medium Enterprise Strategies IoT and M2M Solutions IoT Platforms and Technology Service Assurance Service Delivery Platforms Next-Generation Wireless Networks Network Orchestration Software-Controlled Networking Digital Experience Customer Care Revenue Management Analytics Service Fulfilment Telecoms Software Market Shares Software Forecast and Strategy www.analysysmason.com/research Network investment strategies Telecoms software and networks Consumer services Regional markets Digital economy Global Telecoms Forecasts Asia Pacific Middle East and Africa European Country Reports European Core Forecasts European Telecoms Market Matrix Digital Economy Strategies Future Comms 19
Consulting from Analysys Mason For 30 years, our consultants have been bringing the benefits of applied intelligence to enable clients around the world to make the most of their opportunities. Consulting portfolio EXPERTISE Performance analysis Technology optimisation Commercial excellence Transformation services Performance improvement EXPERTISE Radio spectrum auction support Radio spectrum management EXPERTISE Policy development and response Margin squeeze tests Analysing regulatory accounts Expert legal support Media regulation Postal sector costing, pricing and regulation Regulatory economic costing Net cost of universal service Regulation EXPERTISE Transaction support Commercial due diligence Regulatory due diligence Technical due diligence Spectrum policy and auction support Strategy and planning EXPERTISE Market research Market analysis Business strategy and planning Market sizing and forecasting Benchmarking and best practice National and regional broadband strategy and implementation To find out more, please visit www.analysysmason.com/consulting 20
PUBLISHED BY ANALYSYS MASON LIMITED IN JANUARY 2017 Bush House North West Wing Aldwych London WC2B 4PJ UK Tel: +44 (0)20 7395 9000 Email: research@analysysmason.com www.analysysmason.com/research Registered in England No. 5177472 Analysys Mason Limited 2016. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher. Figures and projections contained in this report are based on publicly available information only and are produced by the Research Division of Analysys Mason Limited independently of any client-specific work within Analysys Mason Limited. The opinions expressed are those of the stated authors only. Analysys Mason Limited recognises that many terms appearing in this report are proprietary; all such trademarks are acknowledged and every effort has been made to indicate them by the normal UK publishing practice of capitalisation. However, the presence of a term, in whatever form, does not affect its legal status as a trademark. Analysys Mason Limited maintains that all reasonable care and skill have been used in the compilation of this publication. However, Analysys Mason Limited shall not be under any liability for loss or damage (including consequential loss) whatsoever or howsoever arising as a result of the use of this publication by the customer, his servants, agents or any third party.