Romania Telecommunications Report Q4 2009

In our Q409 Telecommunications Report for Romania we have revised our five-year forecasts for the mobile, fixed-line and broadband sectors and updated the market data analysis sections. Romania has one of the most developed telecommunications markets in Central and Eastern Europe (CEE) and is home to some of the region’s most prominent players. The main development to occur in the mobile sector has been Cosmote’s acquisition of Telemobil. In June 2009 Telemobil’s owner, Saudi Oger agreed to sell the mobile unit for an enterprise value of EUR207mn. It is not yet clear whether Cosmote will merge with Telemobil or continue to run it as a separate entity but either way we are expecting Cosmote to ramp up competition in the mobile data segment.

Cosmote had been lacking a 3G licence which was its main motivation for acquiring for Telemobil, which operates a CDMA network and a UMTS network. Cosmote is owned by Greece’s OTE – which is now controlled by Germany’s Deutsche Telekom – and we are anticipating it leveraging its backers’ experience in deploying 3G networks and value-added services (VAS). Elsewhere in the mobile sector we expect growth to continue slowing over the remainder of our forecast period. Mobile penetration broke 130% at the end of 2008, although the market contains a large number of inactive SIMs as evidenced by the subscriber declines reported by market leader Orange and number two operator Vodafone in the first quarter of 2009. As Cosmote’s impressive growth has been built around targeting the prepaid segment we also expect Cosmote to have a large number of inactive subscribers, and RCS&RDS’ strategy of providing its mobile services to existing cable customers free has reportedly seen it build up a large inactive subscriber base.

At the end of 2008 there were some 5.036mn fixed lines in Romania, after the sector demonstrated astounding growth of 18.2% through the year. However, the 5.036mn includes VoIP customers which are believed to be the main driving force behind the sectors growth. Romtelecom, the fixed-line incumbent, which dominates the fixed-line sector, reported its own fixed-line subscriber base declining by 2% through 2008, a significant slowdown from the decline seen in 2007. The growing popularity of pay-TV, broadband and bundled service packages is helping to shore up the fixed-line sector. Excluding VoIP we believe that the number of fixed lines is actually declining although not significantly so. Our fixed-line forecasts for the remainder of our five-year forecast period envisages continued growth in the sector taking penetration to 29.3% at the end 2013. Romania’s broadband sector is continuing to develop on several technological fronts. The most popular form of broadband access remains unshielded twisted pair (UTP) and fully shielded twisted pair (FTP) connections. However, Romtelecom and cable operators such as RCS&RDS and UPC Romania are heavily marketing their triple-play services and we anticipate UTP and FTP losing out to ADSL and cable in the long run.