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January 12, 2010
Following a tumultuous start to 2009, with continued downward revisions to GDP across Bulgaria, the Czech Republic, Hungary, Poland, Romania, Russia and Slovakia, mobile operators have benefitted from the demand for data-capable 3G handsets. According to Pyramid Research’s Q4 2009 CEE Mobile Demand Forecasts, 3G+ subscriptions across the region amounted to 12% in 2009, with robust growth expected to drive this figure to 57% by 2014. As such, the contribution of data to total service revenue is expected to grow from 18% in 2009 to 25% in 2014, which compares favorably with a Western European average of 26% and 36%, respectively, in the same period (see Exhibit 1).
Exhibit 1: Ratio of 3G+ mobile subscriptions versus data share of total mobile service revenue, 2008-2014
Source: Pyramid Research Q4 2009 CEE Mobile Demand Forecast
The fast-growing number of 3G subscriptions is most pronounced in markets such as the Czech Republic, Poland and Romania, where operators have been heavily promoting 3G devices and means of online connectivity, often leveraging the immense popularity of social networking. In Poland, Orange recently launched a social networking connectivity promotion that allows its subscribers to browse free of charge the Facebook portal on their mobile phones. Meanwhile, in the Czech Republic, Telefónica O2 is targeting prepay customers with a mobile Internet promotion, offering weekly browsing for free for the first month, followed by a 50% discount on the weekly Kc40 (US$2) fee for the next 12 weeks, after which it is full price (see Exhibit 2). Most importantly, following the Russian government’s decision to clear spectrum for 3G services in Moscow, the Big Three mobile operators — MTS, VimpelCom and MegaFon — will begin seeing an increase in data traffic and, subsequently, revenue.
Exhibit 2: : Telefónica O2 Czech Republic prepay mobile browsing offer, January 2010
Source: Telefónica O2
Meanwhile, 3G-UMTS will emerge as the dominant technology, from just 9% in 2009 to more than 39% by 2014, while surpassing the current leader, GSM/EDGE, in 2011. Despite HSPA networks being in service since 2006 in some markets, users have been slow to upgrade to the technology, with HSPA accounting for only 2% of all mobile subscriptions in the region in 2009, although Pyramid Research expects this figure to grow to 14% by 2014. More importantly we expect that 4G technologies will begin gaining commercial appeal by 2012, with an estimated 1% share of total subscriptions.
— Andrei Tchadliev, Analyst, EMEA
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