REGIONAL FORECAST REPORT CENTRAL AND EASTERN EUROPE TELECOMS MARKET: TRENDS AND FORECASTS 2017 2022 JULIA MARTUSEWICZ -KULINSKA, ROMAN ORVISKY, RÉMY GIRAUD and SIMON LUMB
About this report This report provides: a 5-year forecast of more than 360 mobile and fixed KPIs for Central and Eastern Europe, as a whole and 16 key countries an in-depth analysis of the trends, drivers and forecast assumptions for each type of mobile and fixed service, and for key countries an overview of operator strategies and country-specific topics, in order to highlight similarities and differences by means of a cross-country comparison a summary of results, key implications and recommendations for mobile and fixed operators. Our forecasts are informed by on-the-ground regional market experts from our topic-led research programmes and our consulting division, as well as external interviews. In addition to our robust set of historical data, our forecasts draw on a unique and in-house modelling tool, which applies a rigorous methodology (reconciliation of different sources, standard definitions, top-down and bottom-up modelling). For the complete data set, see the accompanying Excel file at www.analysysmason.com/cee-telecoms-forecasts-2017-rddf0. 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 M2M 2 Prepaid, contract 2G, 3G, 4G, 5G Smartphone, non-smartphone Fixed Voice, broadband, IPTV, dial-up Narrowband voice, VoBB DSL, FTTP/B, cable, BFWA, 5G, other Voice traffic Fixed and mobile Outgoing minutes, MoU Revenue Mobile Service, 3 retail Prepaid, contract Handset, mobile broadband 1, M2M 2 Handset voice, messaging, data Fixed Service, 3 retail Voice, broadband, IPTV, dial-up, business services DSL, FTTP/B, cable, BFWA, other ARPU Mobile: SIMs, handset Prepaid, contract Handset voice, data 1 Includes USB modem, and mid- and large-screen, but not handset-based data. 2 M2M connections and revenue figures include mobile services only. 3 Service revenue is the sum of retail and wholesale revenue. 2
Contents [1] 8. Executive summary 9. The recovery in telecoms revenue will continue during the next few years, driven by handset data revenue growth and fixed network investments 10. Revenue from mobile handset data in CEE, supported by fixed broadband revenue growth, will offset the continuing decline of voice revenue 11. Increasing retail revenue in CEE will be driven by a better performance in the mobile sector and NGA roll-outs 12. Key trends, drivers and assumptions for the mobile and fixed markets 13. Key implications and recommendations for telecoms operators 14. Regional forecasts and cross-country comparison 15. Geographical coverage: The share of NGA and 4G connections will increase in most countries in Central and Eastern Europe 16. Market context: CEE s improving economy will help to increase telecoms revenue 17. Revenue and ARPU: Mobile handset data revenue will account for more than a quarter of total retail telecoms revenue in CEE 18. Mobile penetration: The level of mobile SIM penetration will remain stable in the CEE region, with the exception of Turkey 19. Mobile connections: 4G/5G connections will gradually displace 3G/2G, but we do not expect 3G/2G network decommissions before 2022 20. Smartphones and LTE: The smartphone share of handsets in CEE will reach 82% by 2022 21. Mobile broadband: The widespread deployment of LTE infrastructure in CEE will support short-term growth of mobile broadband connections 22. Mobile ARPU: ARPU will stabilise due to declining competitive pressure on prices and the increasing take-up of more-expensive data plans 23. Data and revenue by generation: 4G technology roll-outs will drive service revenue increases in CEE 24. Fixed services: NGA network deployment and increasing FBB household coverage will be the focus of fixed telecoms operators 25. Fixed broadband: Penetration rates will increase across the region, but the pace of progress will vary due to economical and geographical diversity 26. Key drivers at a glance for each market in Central and Eastern Europe 27. Key drivers at a glance table: methodology [1] 28. Key drivers at a glance table: methodology [2] 29. Individual country forecasts 30. Czech Republic: Revenue will start to recover as mobile voice prices have bottomed out 31. Czech Republic mobile: Revenue will grow, but the market will still be 18% smaller in 2022 than it was in 2012 32. Czech Republic fixed: Competition is driving market decline, but growth will return by 2022 33. Poland: Mobile handset data and fixed broadband will account for 41% of the country s total telecoms retail revenue in 2022 34. Poland mobile: Content services and widespread LTE coverage will help MNOs to increase handset data revenue 35. Poland fixed: Fixed network investments and a focus on service take-up will drive NGA broadband access revenue 3
Contents [2] 36. Russia: Total service revenue will decline by 1.8% per year until 2022, mainly driven by declines in fixed and mobile voice 37. Russia mobile: Competition in the country s mobile market will increase and lead to a decline in handset ARPU 38. Russia fixed: Increasing fibre penetration and the introduction of FMC bundles will soften broadband ARPU decline 39. Turkey: Revenue growth in the fixed and mobile segments will be driven by 4G service take-up and NGA network roll-outs 40. Turkey mobile: The race for 4G coverage and a high mobile handset data service demand will drive an increase in ARPU 41. Turkey fixed: Household FBB penetration will increase to 70% and almost half of households will have NGA access by 2022 42. About the authors and Analysys Mason 43. About the authors 45. About Analysys Mason 4
List of figures [1] Figure 1: Telecoms and pay-tv retail revenue by service type and total service revenue (retail and wholesale), Central and Eastern Europe, 2012 2022 Figure 2: Telecoms and pay-tv retail revenue growth by service type, Central and Eastern Europe, 2016 2022 Figure 3: Telecoms retail revenue growth by type and country, Central and Eastern Europe, 2016 2022 Figure 4: Summary of key trends, drivers and assumptions for Central and Eastern Europe Figure 5: 4G/5G share of mobile connections and NGA share of fixed broadband connections by country, Central and Eastern Europe, 2022 Figure 6: Metrics for the 16 countries modelled individually in Central and Eastern Europe, 2016 Figure 7: Telecoms retail revenue by service type, fixed voice and fixed broadband ASPU, and mobile ARPU, Central and Eastern Europe, 2012 2022 Figure 8: Telecoms retail revenue by service type, and growth rates, Central and Eastern Europe, 2016 2022 Figure 9: Connections by type, and growth rates, Central and Eastern Europe, 2016 2022 Figure 10a: Active mobile SIM penetration by country (excluding M2M), Central and Eastern Europe, 2012 2022 Figure 10b: Active mobile SIM penetration by country (excluding M2M), Central and Eastern Europe, 2012 2022 Figure 11: Mobile connections by technology generation (excluding M2M), and 3G, 4G and 5G s share of connections, Central and Eastern Europe, 2012 2022 Figure 12: Smartphones as a percentage of handsets, and LTE s share of total connections (excluding M2M), Central and Eastern Europe, 2016 and 2022 Figure 13: Mobile broadband connections by screen size and technology, Central and Eastern Europe, 2012 2022 Figure 14a: Mobile ARPU by country, Central and Eastern Europe, 2012 2022 Figure 14b: Mobile ARPU by country, Central and Eastern Europe, 2012 2022 Figure 15: Mobile service revenue and ARPU by technology, CEE, 2012 2022 Figure 16: Data traffic and revenue per megabyte, Central and Eastern Europe, 2012 2022 Figure 17: Fixed broadband connections by type, and fixed voice, IPTV and mobile broadband connections, Central and Eastern Europe, 2012 2022 Figure 18a: Residential fixed broadband penetration of households by country, Central and Eastern Europe, 2012 2022 Figure 18b: Residential fixed broadband penetration of households by country, Central and Eastern Europe, 2012 2022 Figure 19: Major forecast drivers: current situation (2012) and future trajectory (2017 2022), by country, Central and Eastern Europe Figure 20a: Methodology for attributing scores to each element in the key drivers table (current and future) and impact of high scores Figure 20b: Methodology for attributing scores to each element in the key drivers table (current and future) and impact of high scores Figure 21: Telecoms retail revenue by service type and total service revenue (retail and wholesale), Czech Republic, 2012 2022 5
List of figures [2] Figure 22: Telecoms retail revenue by service type, total service revenue and growth rates, Czech Republic, 2016 2022 Figure 23: Connections by type, and growth rates, Czech Republic, 2016 2022 Figure 24: Mobile, smartphone and 4G/5G penetration rates, Czech Republic, 2012 2022 Figure 25: Mobile ARPU by type, and mobile ARPU, Czech Republic, 2012 2022 Figure 26: Summary of key mobile market drivers and assumptions, Czech Republic Figure 27: Fixed penetration rates by service type, Czech Republic, 2012 2022 Figure 28: Fixed ASPU by service type, Czech Republic, 2012 2022 Figure 29: Summary of key fixed market drivers and assumptions, Czech Republic Figure 30: Telecoms retail revenue by service type and total service revenue (retail and wholesale), Poland, 2011 2022 Figure 31: Telecoms retail revenue by service type, total service revenue and growth rates, Poland, 2016 2022 Figure 32: Connections by type, and growth rates, Poland, 2016 2022 Figure 33: Mobile, smartphone and 4G/5G penetration rates, Poland, 2012 2022 Figure 34: Mobile ARPU by type, and mobile ARPU, Poland, 2012 2022 Figure 35: Summary of key mobile market drivers and assumptions, Poland Figure 36: Fixed penetration rates by service type, Poland, 2012 2022 Figure 37: Fixed ASPU by service type, Poland, 2012 2022 Figure 38: Summary of key fixed market drivers and assumptions, Poland Figure 39: Telecoms retail revenue by service type and total service revenue (retail and wholesale), Russia, 2012 2022 Figure 40: Telecoms retail revenue by service type, total service revenue and growth rates, Russia, 2016 2022 Figure 41: Connections by type, and growth rates, Russia, 2016 2022 Figure 42: Mobile, smartphone and 4G/5G penetration rates, Russia, 2012 2022 Figure 43: Mobile ARPU by type, and mobile ARPU, Russia, 2012 2022 Figure 44: Summary of key mobile market drivers and assumptions, Russia Figure 45: Fixed penetration rates by service type, Russia, 2012 2022 Figure 46: Fixed ASPU by service type, Russia, 2012 2022 Figure 47: Summary of key fixed market drivers and assumptions, Russia Figure 48: Telecoms retail revenue by service type and total service revenue (retail and wholesale), Turkey, 2012 2022 Figure 49: Telecoms retail revenue by service type, total service revenue and growth rates, Turkey, 2016 2022 Figure 50: Connections by type, and growth rates, Turkey, 2016 2022 6
List of figures [3] Figure 51: Mobile, smartphone and 4G/5G penetration rates, Turkey, 2012 2022 Figure 52: Mobile ARPU by type, and mobile ARPU, Turkey, 2012 2022 Figure 53: Summary of key mobile market drivers and assumptions, Turkey Figure 54: Fixed penetration rates by service type, Turkey, 2012 2022 Figure 55: Fixed ASPU by service type, Turkey, 2012 2022 Figure 56: Summary of key fixed market drivers and assumptions, Turkey 7
Geographical coverage: The share of NGA and 4G connections will increase in most countries in Central and Eastern Europe Figure 5: 4G/5G share of mobile connections and NGA share of fixed broadband connections by country, Central and Eastern Europe, 2022 1 CZECH REPUBLIC 3 E STONIA 4 5 6 7 8 HUNGARY LATVIA LITHUANIA MONTENEGRO 79% 80% 77% 81% 85% 76% 74% 76% 94% 88% 85% 78% 72% 54% CROATIA 22 6 4 11 84% 90% POLAND 9 BULGARIA 1 7 65% ROMANIA 10 3 9 16 88% KEY: Metrics for 2022 14 13 5 10 58% RUSSIA 11 82% 4G/5G share of mobile connections 56% 26% 2 12 1 15 8 16 UKRAINE TURKE Y 15 SLOVE NIA 14 SLOVAKIA 13 65% 78% 67% 88% 55% SE RBIA 12 NGA share of fixed broadband connections 59% 70% 94% 68% 71% Source: Analysys Mason 1 For a full list of countries modelled as part of the Central and Eastern Europe region, please see the accompanying data annex. Mobile connections exclude M2M connections. NGA share of fixed broadband connections is calculated as cable, VDSL and FTTP connections (that provide access speeds of 30Mbps or more) divided by the total number of fixed broadband connections. 15
Revenue and ARPU: Mobile handset data revenue will account for more than a quarter of total retail telecoms revenue in CEE Figure 7: Telecoms retail revenue by service type, fixed voice and fixed broadband ASPU, and mobile ARPU, Central and Eastern Europe, 2012 2022 Retail revenue: Mobile voice Mobile broadband Mobile messaging Mobile M2M Fixed voice and narrowband Business services Pay TV Mobile handset data Fixed broadband and IPTV Mobile ARPU 1 Fixed voice ASPU Fixed broadband ASPU 1 Mobile ARPU is calculated as total mobile service revenue (retail and wholesale), excluding M2M, divided by total average mobile connections, excluding M2M. Figure 8: Telecoms retail revenue by service type, and growth rates, Central and Eastern Europe, 2016 2022 Service type Revenue (EUR billion) CAGR 2016 2022 2012 2016 2016 2022 Mobile voice 16.8 13.1 4.4% 4.1% Mobile messaging 2.3 1.1 8.4% 11.3% Mobile handset data 9.0 15.0 29.6% 8.9% Mobile broadband 1 2.5 2.5 9.2% 0.3% Mobile M2M 0.4 1.0 34.7% 15.3% Fixed voice and narrowband 2 6.3 4.1 8.4% 6.9% Fixed broadband and IPTV 7.7 9.4 6.9% 3.4% Business services 3.8 4.3 9.9% 1.9% Telecoms 48.9 50.5 1.6% 0.5% Pay TV 4.6 4.9 2.3% 1.2% Telecoms and pay TV 54.1 56.4 1.8% 0.7% 1 Includes USB modem, and mid- and large-screen, but not handset-based data. 2 Includes narrowband, VoBB and dial-up Internet access. Figure 9: Connections by type, and growth rates, Central and Eastern Europe, 2016 2022 Connection type Connections (million) CAGR 2016 2022 2012 2016 2016 2022 Mobile handsets 517.2 538.7 2.1% 0.7% Mobile broadband 36.2 36.9 10.1% 0.3% Mobile M2M 23.0 58.6 23.0% 16.9% Fixed voice 90.0 81.1 4.3% 1.7% Fixed broadband 73.6 85.0 6.0% 2.4% IPTV 12.9 17.6 16.1% 5.2% Total pay TV 90.1 95.6 3.9% 1.0% 17
CONTENTS EXECUTIVE SUMMARY REGIONAL FORECASTS AND CROSS-COUNTRY COMPARISON INDIVIDUAL COUNTRY FORECASTS ABOUT THE AUTHORS AND ANALYSYS MASON 42
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. Roman Orvisky (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. Rémy Giraud (Research Analyst) is a member of the regional markets research team in London, contributing mainly to the Telecoms Market Matrix, European Core Forecasts, European Country Reports and Global Telecoms Forecasts research programmes. Rémy holds a BSc in economics from the London School of Economics (LSE), and is on course to obtain an MSc in Risk and Finance from EDHEC Business School. 43
About the authors Simon Lumb (Research Analyst) is a member of the regional markets research team in London, contributing mainly to the Telecoms Market Matrix, European Core Forecasts, European Country Reports and Global Telecoms Forecasts research programmes. Simon holds a BSc in Physics from the university of Durham 44
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