Slovaks have a choice of three mobile operators. (source: SME)
MOBILE telephony in Slovakia recently passed a significant anniversary rather quietly – the first mobile telephone call in this country was made on the NMT analogue network in September 1991. That technology now looks like prehistoric times as Slovakia now has three mobile operators using 3G networks with further technological upgrades already in the pipeline. And even though penetration of mobile services, as measured by the number of active SIM cards, passed 100 percent in 2008 it looks like another mobile operator might be interested in the Slovak market.
The reactions from the existing mobile operators to that idea were mixed: two operators believe the Slovak market is fully saturated, while the other said a new competitor might bring some refreshing ideas to the market.
In early August the Slovak Telecommunications Regulatory Authority (TÚ) confirmed that there is an interest among mobile operators in entering the Slovak market, particularly in frequency bands 800 MHz and 2,600 MHz which the TÚ plans to allocate in the near future. Both bands are suitable for providing high-speed internet access and they will be available at the beginning of 2012.
The TÚ announced that a large Asian mobile operator currently operating on three continents has shown a strong interest in purchasing these frequencies and becoming a fourth mobile operator in Slovakia and using it as a base to gradually penetrate the wider European market. The company is reported to be Viettel Mobile, a Vietnamese company.
“For now we can still only talk about a preliminary interest,” TÚ spokesperson Roman Vavro told The Slovak Spectator, adding that the office will be able to talk about levels of interest only after offers are actually submitted within the selection process.
The TÚ plans to start that process during the first quarter of 2012 and a fourth mobile operator might be able to begin operations before the end of 2012, at least from a technical standpoint. The criteria on which the TÚ will allocate the frequencies will be a topic of public discussion and the office is also considering whether to use an electronic auction. The office has prepared a draft revision to legislation to enable this and Slovakia’s parliament may debate the draft in November.
The authority may also use conditions in the selection process to patch holes in broad-band internet access in some parts of the country and is considering allocating frequency bands of 900 MHz and 1,800 MHz to participants who do not currently have them in order to strengthen competition in the market, Vavro said.
All three existing mobile operators have confirmed their preliminary interest in acquiring these frequencies, the SITA newswire reported.
A fourth operator?
Slovakia waited until 2006 for a third mobile operator, Telefónica Slovakia, to enter the market and it launched commercial operations in February 2007.
Karl Reindl, a mobile market expert, views the Slovak market as quite small and said that would be a challenge for a new operator.
“The Slovak market is very small and with high mobile saturation already,” Reindl told The Slovak Spectator. “Along with the overall economic situation this makes it difficult to be interesting for a new entrant.”
Reindl believes that Slovakia’s third mobile operator and other virtual mobile network operators have already pushed prices down and covered niche segments and that makes the market quite challenging for a fourth operator. Customers are already demanding that existing companies put in place complete networks and coverage, Reindl said, adding that a new market entrant would also be dependent on the regulator's conditions. He noted that the pricing approach taken by the TÚ during the recent licence renewal process for the first two mobile operators will have an impact on the strategic decision-making of any possible new entrant.
This past summer the TÚ extended licences for Slovak Telekom and Orange Slovensko, the first two operators, for 10 years for one-off payments totalling nearly €90 million for the two firms. Both companies initially appealed the pricing decision but Slovak Telekom agreed in late October to pay its fee. Orange Slovensko is still waiting for a decision from the appeal procedure, SITA wrote in late October.
“But there is always space for surprises,” Reindl said. “Especially positive ones.”
Orange Slovensko, the biggest mobile operator in Slovakia with 2.888 million active SIM cards at the end of September, has been reserved about the possible arrival of a fourth operator.
“We are unable to comment on the entry of another operator or its potential impact on the market because we do not have any information about the selection procedure,” Peter Tóth, corporate affairs manager at Orange Slovensko, told The Slovak Spectator.
Slovak Telekom, which reported over 2.2 million active SIM cards in late June, views the Slovak mobile market as fully saturated.
“With regards to saturation of the market, return on investment – which a new player must invest in building an infrastructure comparable with the established operators – is questionable,” Michal Korec from press department of Slovak Telekom told The Slovak Spectator. “This is then linked with further investments into the market, customers and operations in Slovakia.”
The third and most recent entrant in the mobile market, Telefónica Slovakia, told The Slovak Spectator that in the light of its experience in coming to the Slovak market five years ago that a fourth operator might bring refreshing ideas. When Telefónica Slovakia entered the Slovak market there was already a high penetration rate, but nevertheless Telefónica was able to build a customer base of about 1 million people under its O2 brand.
“We only welcome the growth of competition and further liberalisation of the market,” Martina Jamrichová, spokesperson of Telefónica Slovakia, told The Slovak Spectator. “For a new player the creation of a brand-new network infrastructure probably might not have economic justification but that does not exclude more cooperation by operators in sharing networks – rather the opposite.”
Jamrichová said that the Slovak telecom market has undergone significant development since the arrival of Telefónica Slovakia in 2007 and that her company has actively contributed to this by opening new themes such as fairness and a simple and transparent approach focused on customer satisfaction. She stated that Telefónica Slovakia has had to stand up for issues such as cutting prices for mobile services and a customer’s right to transfer a mobile number to a different operator and to cancel two-year contracts.
“The possible arrival of a fourth player might bring fresh ideas and a generally new view of the development of the market,” Jamrichová stated.
