Fixed-Line Telecommunications Markets Face Irreversible Shrinkage in Central and Eastern Europe,

IDC: Lower prices have not stopped the decline of Central and Eastern European fixed-line telephony markets. In eight CEE countries (the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia), the total number of fixed lines is expected to dip at an annual average rate of 1.2% from 22.7 million to 21.4 million over the next five years, while revenue will drop at an annual average rate of 4.2% from $6.12 billion to $4.97 billion.

The shrinking of the market for fixed-line services is irreversible and requires operators to develop alternative business models to maintain revenue streams. Despite the slowdown in mobile penetration, mobile substitution will continue to draw users from fixed lines as mobile services become more versatile and affordable due to intensifying competition. Traffic over traditional fixed lines will also diminish as VoIP services become more popular in the second half of the forecast period.

In general, telephony markets in Estonia, the Czech Republic, Slovakia, and Hungary are contracting the fastest.

• Fixed-line revenue will plummet by nearly 9% in Hungary and the Czech Republic this year.

• Fixed-line revenue will drop by more than 7% in Estonia and nearly 7% in Slovakia this year.

• PSTN traffic (including voice and dial-up) will plunge by 15.6% in Slovakia and 14.5% in the Czech Republic this year.

• The Czech Republic and Estonia will see the highest annual average drop in connections per 100 households over the next five years.

The news is not all bad, however. Broadband Internet access is a key area of growth in the fixed-line telecoms markets and will help offset the drop in revenue from fixed-voice telephony. It also serves as an incentive for customers to keep their existing fixed lines, thus maintaining the customer base.

Broadband connections like ADSL are the way forward, but they are not long-term panaceas for regaining revenue lost to mobile substitution. Vendors need to realize that fixed-line voice services are moving towards a low-profit utility model. Operators need to adopt aggressive strategies that involve service and operational integration of incumbents and mobile services providers, offer flexible tariff programs, and design services targeted at business users.

Central Europe Telephony Services 2006–2010 Forecast Publ 20060605