Czech Republic Telecommunications Report Q3 2008

One can tell much about the state of a market by looking at its major suppliers and the regulator. With suppliers such as Telefnica O2, T-Mobile, Vodafone, Telekom Austria, GTS Novera and UPC all well placed and a regulator in tune with the importance of a competitive market, it should come as little surprise that the Czech telecoms market is developed in terms of penetration, technologically advanced and well regulated.

BMI places the Czech Republic second in our Business Environment Rankings, behind Hungary. It has a competitive telecoms market. Underpinning this is a high broadband penetration rate of 14.5% with growth fuelled by local loop unbundling. In addition, the Czech telecoms market has a mature fixed wireless infrastructure, and despite being home to a saturated mobile market, its operators continue to invest. In addition to technological advancement, there is little risk to investment. The Czech Republic has a very stable business environment, a supportive government in terms of encouraging foreign direct investment and a skilled workforce. A strong economy and stable political climate complete the healthy picture.

Like many of its neighbouring markets, there is little fixed-line growth, with telephony showing continued signs of a reduction in traffic. Any growth comes from the DSL and pay-TV markets, and an increasingly competitive market with alternative providers such as GTS Novera and UPC encouraged by alternative fixed-line technologies. Broadband connectivity in the Czech Republic increased by 55% as the total net additions market reached 600,000 in 2007. By the end of 2010, BMI projects a total of 2.9mn high-speed internet subscribers.

The mobile market showed puny growth in comparison. By the end of 2007, there were just over 13mn wireless subscribers showing 6% y-o-y growth in customer numbers. BMI projects a dramatic slowdown in growth over our forecast period, with an average annual growth rate of just 1% for the next five years.

This would mean a total of 13.75mn mobile subscribers and a penetration rate in excess of 135% at the end of 2012.

T-Mobile remains the Czech Republic's dominant mobile operator with a 40.4% share of the market, but it holds only a slender lead over rival operator Telefonica O2. With its market share lower than at any time since June 2006, T-Mobile holds a 1.2 percentage point advantage over Telefonica O2, which conversely has seen its market share exceed 39% for the first time since the end of 2006. Completing the picture is Vodafone, which continues to perform well (it has a particularly high percentage of contract subscribers) and has a 20.4% market share. In terms of net additions for 2007, Telefonica O2 attracted the most (36%, and helped by a very strong second half to the year), ahead of Vodafone on 34% and TMobile with 31%.