Croatia Telecommunications Report Q2 2008

Croatia has a telecoms industry similar to many other developing markets in Central & Eastern Europe.

Liberalisation has intensified competition in the fixed line telephony market with a number of alternative operators and cable TV operators challenging the incumbent in the fixed line telephony, broadband and IPTV space. The country's mobile market is becoming crowded with official penetration in excess of 100% (although the number of inactive users means that actual penetration is probably closer to 90%) and multiple SIM-ownership becoming more common. Also, like other markets, such as Romania and Bulgaria, a third mobile operator - in the shape of Tele2 in Croatia - is making huge strides in stealing market share away from its larger and more established rivals. Invariably, this tends to lead to an erosion in tariffs and a general fall in ARPU rates. A common trait also for many developing markets in the CEE region is the relatively slow introduction of 3G mobile telephony. Both the market leader T-Mobile and second-ranked Vipnet have launched next-generation networks, but as yet take-up has been slow.

With an approximate 85% share of the fixed line market and a 90% market share of Croatia's growing broadband market, T-Hrvatski Telekom still dominates Croatia's telecoms market. In addition to this, its mobile subsidiary T-Mobile is the market leader with 47% of the country's subscribers. BMI thinks that by the end of 2008, Croatia's alternative telcos could between them control a 20% share of Croatia's fixed line market, lead by Optima Telekom following its successful IPO in December 2007, from which it managed to raise HRK140mn, allowing the alternative operator to continue deployment of advanced ADSL, IP and WiMAX-based broadband networks across Croatia. It is also a good sign for the market as a whole that the government has announced 15 new operators are on a waiting list to receive a fixed line telephony operating licence. Not only does this illustrate the growth in competition of Croatia's telecoms market, but will have an impact on fixed telephony tariffs.

Despite reaching saturation levels, Croatia's mobile market shows few signs of entering a period of slowdown. The latest data available at the time of writing reveals that the number of mobile subscribers reached 4.8mn in September 2007, growing by 4% q-o-q, at a faster rate than the previous two quarters (3.4% and 2.4%). We estimate approximately 4.9mn subscribers at the end of 2007, which would mean 12.5% growth over the year. However, there is likely to be a period of levelling out with the next few years seeing only smaller rates of incremental growth (an annual average growth rate of 3.7% over the next five years until 2012). What growth there still is in the market will be sustained by a reduction in tariffs, a growing number of users of advanced mobile services and the further intensification of competition with Tele2 (and possibly a group of MVNOs in the future) stealing market share away from its rivals.