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Globtel celebrates big client lead over EuroTel

Globtel GSM notched its 400,000 customer on May 18, leaving the firm over 100,000 customers ahead of EuroTel, its only competitor on the Slovak mobile telephony market. Although Globtel joined the market fully six years after EuroTel was launched in 1991, the firm has built its 57.8% market share through subsidised prices and effective promotion.
EuroTel, which operates on both NMT and GSM-900 frequency networks, ascribed the widening gap between the two companies to a number of factors, including poor marketing strategies on EuroTel's part in the past, a business strategy that focused on generating yearly profits rather than expanding client base, and the low prices offered by Globtel.


Globtel has vaulted to 400,000 customers with savvy promotion, absorbing losses to surpass EuroTel.
photo: Ján Svrček

Globtel GSM notched its 400,000 customer on May 18, leaving the firm over 100,000 customers ahead of EuroTel, its only competitor on the Slovak mobile telephony market. Although Globtel joined the market fully six years after EuroTel was launched in 1991, the firm has built its 57.8% market share through subsidised prices and effective promotion.

EuroTel, which operates on both NMT and GSM-900 frequency networks, ascribed the widening gap between the two companies to a number of factors, including poor marketing strategies on EuroTel's part in the past, a business strategy that focused on generating yearly profits rather than expanding client base, and the low prices offered by Globtel.

Norbert Krajčí, EuroTel's Marketing Manager, explained that Globtel's emerging market dominance was "a simple question with a simple answer, [which is] the low-pricing policies of Globtel. Globtel is the cheapest mobile provider in Europe while Slovakia is, perhaps, the most price sensitive European country."

Krajčí added that his firm was also to blame for their recent lackluster numbers, since they had emphasised profit over clientele. "From the point of view of the customer, [EuroTel's] strategy has not been so good," he said. "But from the financial point of view, it has been very good because we have profited."

Globtel officials, meanwhile, said their success was the direct result of last year's marketing strategy, which public relations manager Dagmar Brisudová described as an "attack" on the market.

According to Emilián Dzugas, Globtel's Sales Manager, the numbers speak for themselves. Less than one year after joining the market on January 15, 1997, he said, Globtel took its first lead over EuroTel in terms of customer share, posting a total of 112,000 customers to EuroTel's 110,000 in December, 1997.

The margin increased dramatically in 1998, when Globtel tripled its client base to 325,000 users. Globtel launched aggressive promotions in 1998, including an offer of the Ericsson 628 phone on March 15 for one Slovak crown, the Siemens S8 handset for 88 crowns last summer, followed by the Motorola D520 for 52 crowns.

According to Are Mathisen, managing director of Norwegian telecom company Telenor International, this aggressive strategy is what won Globtel its current lead on the Slovak market. "Globtel spends more money [than EuroTel] on marketing and subsidizing, which is a normal move on a new market," he said. "When you are not the first to enter a market, subsidising is the best tool to use," added Mathisen, whose firm is involved in mobile telephony operations in 26 countries.

Dzugas admitted that Globtel had been surprised by their instant success, and said that as a result of the response, the firm had been forced to alter their original goals and strategies in order to keep up with the market. Network capacity had to be increased, he said, and the business plan rewritten.

"When we started, our goal was 24,000 customers in the first year," remembered Dzugas. "But we got 17,000 in the first three and a half months. We didn't expect so many customers, but we learned that with a good pricing strategy and good coverage, people would want to use our network. So, we had to change our plans."

According to EuroTel brass, however, while Globtel's promotional strategies may have brought it a huge client base, they have also left the firm consistently in the red.

According to the business weekly paper Trend, Globtel finished 1997 with a loss of 1.576 billion crowns, compared to EuroTel's profit of 570 million crowns. Globtel's loss increased to over 2 billion crowns in 1998.

Krajči conceded that EuroTel's falling market share "bothers us... I cannot tell you what our owners expect, but I think they're not too happy because they want a majority of the market and we don't have it."

Krajčí said his firm's strategy would now focus more on increasing market share. He refused to provide concrete details of how EuroTel would achieve this goal.

However, Krajčí said, EuroTel would never abandon its determination to make a profit out of its business. "Globtel has more customers and a bigger market share, but EuroTel has better [revenue] results," said Krajčí. "Why are we in the market? To be a charity or to earn some money?"

Globtel, for its part, said it would continue to build its customer base. "Each day we grow," said Dzugas, "and each day we collect our competitor's clients."

If Globtel's market share continues to grow as quickly as it has, the very size of its customer base may give added reasons for new customers to choose Globtel.

Zuzana Chudíková, a student at Bratislava's City University, says she switched from EuroTel to Globtel last year because of Globtel's lower prices, and because most of her friends had Globtel phones, making the cost of dialling from her EuroTel phone to the Globtel net - the so-called 'interconnect charges' - prohibitively expensive.

"Globtel is cheaper," she said. "EuroTel has a very good network and Globtel's system is sometimes overloaded, but the main reasons I changed were the prices and because more people have Globtel."

"One argument in favour or buying Globtel could be because 'my family and friends have Globtel,'" EuroTel's Krajčí agreed. EuroTel was "in the process" of lowering interconnect charges, he said, and until the process is complete, "we have prepared some strategies to bring them [customers] to EuroTel."

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