In April 2014, the national regulator ANCOM decided to decrease the maximum tariff for mobile call termination by 70%, from 3.07 to 0.86 eurocents/minute, irrespective of the opposition of local mobile providers arguing that these cuts resulting in reduced revenue and profits will limit future investment in next generation networks. Shortly after, in July 2014, MNOs across EU were hurt by community regulators imposing drastic cuts to roaming charges, resulting in almost halved roaming revenues.
Clash of the titans: the battle continues on the telecom market
The past twelve months have seen plenty of changes and consolidation in the local telecom market. We have witnessed the largest rebranding in the history of the Romanian telecom market (with an allocated budget of almost EUR 15 million according to the group representatives). Starting September 13, 2014 Cosmote and Romtelecom will be operating under the Telekom (“T”) brand, while the company aims to focus on its ability to offer packages with integrated services. If prior to the rebranding process Romtelecom and Cosmote operated on a stand-alone basis (with different client databases and commercial offers), the “new” T operator now seems ready to offer “full service” bundles as one product. This appears to be how T is trying to position itself and differentiate on the market, and while company representatives are stating that they have no intention of starting a “price war”, that part remains to be seen.
In a separate development, Romania Cable Systems (RCS&RDS) continued efforts to increase its market share. In April 2014, the company entered a two year national roaming agreement with Vodafone in order to allow its customers access to mobile services in the areas where RCS & RDS does not have coverage. At the same time, the company is launching a 900MHz proprietary GSM network and planning to cover 500 locations by the end of 2014.
Also, this year we have seen a higher focus on value added services, with the launch of M-Pesa mobilecommerce platform by Vodafone in April 2014. The company has chosen Romania as the first European market for its mobile wallet and payment service. The service, first introduced in Africa in 2007, aims to take opportunity of the low penetration of the banking system in Romania (only about 60% of the country population has a bank account and even a lower percentage owns a bank card). While Orange had plans to launch Orange Money Service before Vodafone, it is expected to do so in the second half of 2014.
Evolution of the mobile and fixed sectors
Although Romania has one of the lowest levels of Average Revenue Per User (ARPU) in the region, penetration rates in Romania are high: according to BMI, in the first quarter of 2014, total mobile subscriptions amounted to 27.41 million, which translates into a penetration rate of 126.7%, with a gain of 257,000 subscribers last year.
Concerning subscription trends, both Orange and Vodafone reported net subscriber additions on the year, gains realized at the expense of Cosmote, who reported net subscriber losses.
No significant changes occurred in the market share split between the major operators, as shown in the chart below. An overall trend observed in the Romanian mobile market is the gradual shift towards postpaid subscriptions.
In terms of ARPUs, both Vodafone and Orange saw increases, with Orange reporting ARPU of EUR 6.5 in the first quarter of 2014, and Vodafone reporting ARPU of EUR 6.3. Improvement in economic conditions and in the subscriber mix, along with the wider use of value-added services, might lead to further increases in ARPU. The two leading mobile operators have been helped by their joint venture, aiming to develop a common network that can protect their commoditized turf and that allows them to focus on the customer.
Evolution of mobile phone subscribers and main telephone lines in service
The fixed telephony market was characterized by volatility in the previous period. The drop, led by the substitution of fixed telephony with mobile telephony, has been balanced on the other side by increases due to product bundling (fixed telephony offered as 2-play or 3-play bundles).
Content and M&A are the buzz of the market
With the commoditization of the market becoming inevitable, telecom operators are starting to focus increasingly on deriving value from content delivered to consumers. With each of the national players now holding some content-generating assets, the fight over content is only going to get more intense in the coming year with more cash being poured into it.
With the increased blending of telecom services, competition is now pushing into all telecom submarkets. Mobile operators are facing off against fixed line operators, just as much as they compete with broadband internet providers and cable operators. With numerous networks also overlapping each other, the fight over geographic and product coverage will get worse before it gets better. With a possible merger between Vodafone and Liberty Global and rumors of talks about a global leader resulting from an AT&T - Vodafone marriage, things are going to get equally interesting on a continental or even global scale.
On a more granular level, it will be interesting to see whether the new “T” will manage to disrupt the ranking of the past few years on the Romanian telecom market.