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Slovakia may become a UMTS 'gap filler'

Combined with the uncertainty that reigns over the future development of the global mobile phone network, Slovakia's role as 'regional portfolio gap-filler' may ultimately decide who takes up the offer of a third UMTS licence alongside existing operators Globtel and EuroTel.
"The telecoms market here is not that attractive, but the thing is that Slovakia is a central European regional gap for any telecoms firm [in a regional company strategy], and a company will look at it and say 'Why not take advantage of this?'" said Boris Kostík, telecoms analyst at Slávia Capital brokerage house in Bratislava.
The Slovak market, which is relatively small in comparison to its central and eastern European neighbours (Slovakia has 5 million inhabitants as opposed to the Czech Republic and Hungary's 10 million and Poland's nearly 50 million) has been left at the bottom of many telecoms giants' one-off shopping lists. However, this seemingly unattractive low-volume customer base has not detracted from one of the country's selling points to potential telecoms investors - its strategic position in any company's eastward expansion scheme.

Combined with the uncertainty that reigns over the future development of the global mobile phone network, Slovakia's role as 'regional portfolio gap-filler' may ultimately decide who takes up the offer of a third UMTS licence alongside existing operators Globtel and EuroTel.

"The telecoms market here is not that attractive, but the thing is that Slovakia is a central European regional gap for any telecoms firm [in a regional company strategy], and a company will look at it and say 'Why not take advantage of this?'" said Boris Kostík, telecoms analyst at Slávia Capital brokerage house in Bratislava.

The Slovak market, which is relatively small in comparison to its central and eastern European neighbours (Slovakia has 5 million inhabitants as opposed to the Czech Republic and Hungary's 10 million and Poland's nearly 50 million) has been left at the bottom of many telecoms giants' one-off shopping lists. However, this seemingly unattractive low-volume customer base has not detracted from one of the country's selling points to potential telecoms investors - its strategic position in any company's eastward expansion scheme.

Deutsche Telecom, the new controlling shareholder of EuroTel following its August acquisition of state fixed line monopoly Slovenské telekomunikácie (ST), has said that its entry into Slovakia fit into its overall regional strategy rather than being a particularly lucrative one-off entry into a burgeoning market. The firm said it saw Slovakia as a gap that it could fill in its central European portfolio following major acquisitions in Hungary and Croatia last year.

"I think that in any future operations, it is of course important that we have a regional presence already," said Stefan Reeg, vice-president of Deutsche Telecom's international post-merger management and integration team.

It is expected that any bidders for the third Slovak UMTS licence may seek to employ the same strategy of building regional networks while securing individual country market share.

"It may be that a bidder for the UMTS licence would use that as a way of covering some parts of Slovakia or even further, adding to a regional coverage, and also using other [possibly GSM] services to cover the rest [of Slovakia]," said Kostík.

A degree of uncertainty in the development of the global UMTS market, as mobile telephone technology becomes a larger and more closely integrated part of wider IT technology, is also expected to influence who is in the bidding and how much they will pay when the licence goes up for grabs in just over one year.

Ondrej Datka, telecoms analyst with Patria Finance in Prague said: "The whole thing with UMTS is that there will be more competition, adding an extra dimension to the mobile phone market, but that [future of the market] is so hard to predict that it's not worth trying to do just now."

Kostík explained: "Firms will definitely take a look at the mobile market. It's not that the fixed-line market is no longer important, but the mobile market will offer future opportunities. With Deutsche Telecom's acquisition of ST, the prohibitive cost of setting up a new fixed-line network has left companies looking to the mobile market."

He added that the future of telecoms was moving towards data transfer, and that in two or three years even Internet providers could be taking part in a consortium with existing mobile operators, adding an extra equation to who may be looking at the licence in Slovakia now with one eye on the future. "The whole UMTS question in Slovakia is just too hard to predict at the moment. We'll have to see what happens and who'll be interested in a few years," said Kostik.

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