Annual report 2012

Development of ICT markets (Slovenia / global / European Union / South-Eastern Europe)

Saturation and slowing growth in fixed broadband connections

 Slowing growth in fixed broadband connections continues in Slovenia and elsewhere in the EU. Growth in the EU overall reached its lowest level of the last five years in July 2011, but was up slightly in January 2012. The proportion of growth accounted for by leading operators is lower than that accounted for by alternative operators (January 2012: 34 %), thus driving down their market shares. According to the latest figures published by the European Commission from January 2012, Slovenia has slipped below the European average in terms of broadband population penetration, after being at the average or slightly above it in previous years. Contributing to the aforementioned trend is low growth in broadband connections.

Planned subsidies for broadband connections, for which the EU is expected to earmark EUR 9.2 billion between 2014 and 2020, represent an opportunity for Telekom Slovenije, GVO and other Group companies. According to plans set out in the EU’s Digital Agenda, all households in the EU should have internet access with a speed of at least 30 Mbps by the end of 2020, while half of the population should have access of 100 Mbps. The improvement of internet connections in Europe is expected to contribute to higher economic growth.

Growth in mobile broadband access

Mobile internet and data services are the fastest growing segment of all telecommunication services, and are expected to remain so in the future. The aforementioned services recorded 10 % growth at the EU level between 2010 and 2011, and accounted for 13.8 % of telecommunication services revenues.

With a penetration rate of 2.5 %, Slovenia ranks last in terms of the penetration of mobile broadband access to the internet via USB modems and cards (the average for the EU-27 was 8.1 % at the end of 2011). The leading country in this respect is Finland with a penetration rate of 53 %. Slovenia is also below the EU average in terms of total active users of the mobile internet, with a penetration rate of 29.1 % compared with the EU-27’s rate of 43.1 %. With the establishment of the LTE network, Slovenia, and thus Telekom Slovenije, has a great deal of potential and room for growth in mobile data transfer.

The analysts and consultants of Analysys Mason forecast that the mobile broadband internet will primarily be an additional service on the European market in the future as well, and not a household’s only means of access to the broadband internet. Average revenue per user/unit (ARPU) will continue to decline in the future, on both the residential and commercial markets.

Development of fibre optic connections for higher speeds and new multimedia services

Slovenia ranks ninth globally and fifth in Europe in terms of fibre optic access penetration (FTTx). The number of broadband FTTx connections in Slovenia continues to grow, accounting for 17.3 % of all broadband connections at the end of the third quarter of 2012, compared with a 2 % share in the EU overall. The proportion of broadband connections accounted for by fibre optic connections will continue to rise in the future.

Growth in the pay TV market

Leading operators are entering the television programme and content distribution market with multimedia content services such as Video on Demand, HD content, interactive TV content and IPTV. The importance of the aforementioned services is growing. Cable TV is predominant in Europe, but the proportion accounted for by IPTV is rising. Trends point to the faster development of new technologies to deepen and enhance the user experience. The aim of integrating the internet and the television set is to re-establish the latter as the centre of the home. Some major manufacturers are already offering the installation of widget applications with which users can view weather, sports results, etc. without needing a computer. Communications such as VoIP and video conferencing are also migrating to TV sets.

The analysts and consultants of Analysys Mason are forecasting that the European pay TV market will grow by 12 % between 2011 and 2016. The main factors in that growth will be growth in satellite TV and IPTV, while cable TV will decline by 4.4 % by 2016. Pay TV penetration will near 60 %. Due to the lowering of household costs, growth in OTT video content services will primarily be as a second TV set, as users will have one of the traditional TV services (cable TV, IPTV, satellite TV, etc.) as their primary source. Slovenia remains one of the leaders compared with Western European countries in terms of household penetration of IPTV connections, ranking second immediately behind France, while the number of connections continues to growth.

Mobile voice telephony increases its advantage over fixed telephony

In the area of voice telephony, traditional telephony is being replaced by VoIP telephony, while users are making increasingly more calls from the mobile network than the fixed network. An increase in the number of households that only use the mobile network is also expected. 

Mobile telephony penetration is 115 % in Western Europe, while three quarters of households in Europe have fixed telephony. With a fixed telephony household penetration rate of 85 %, Slovenia is above the European average. At 109 %, mobile telephony penetration is below average. The proportion of households with both fixed and mobile telephony is higher in Slovenia than in the EU, while the proportion of households with only mobile telephony is lower. The proportion of the latter, however, is growing and approaching the EU average. The continuing decline in fixed telephony connections can thus be expected in the future. The analysts and consultants of Analysys Mason are forecasting that the proportion of households that only use the mobile network will be around 30 % in Western Europe by 2016, and around 50 % in Central and Eastern Europe. The reason lies in the fact that fixed telephony is still less expensive in Western Europe, while mobile telephony is considerable more competitive in Central and Eastern Europe.

Growth in package offers (dual play, triple play and quadruple play)

Slovenia has one of the highest proportions of packages in the EU, trailing only the Netherlands, Belgium and France. Dual play, triple play and quadruple play packages accounted for 83 % of all Slovenian broadband connections at the end of the third quarter of 2012. The key reason for such growth lies in the associated price benefits. Because the integration of markets and operators will continue in the future and all major providers of fixed services also offer mobile telephony services, growth in such packages is expected to continue. 

ICT market and cloud computing

According to the figures of analysts, cloud computing accounts for 1.9 % of the entire IT market, with the public cloud accounting for 36.2 % of the cloud computing market. At the global level, the public cloud accounts for 3 % of the entire IT market, with that proportion expected to be maintained until 2016. This indicates the relatively modest development of the cloud computing market in Slovenia, which may also represent an opportunity and untapped potential. Cloud computing offers cost savings to individual segments of companies.

Markets in South-Eastern Europe

By providing a high-quality network and personalised services for users, Telekom Slovenije Group companies make an important contribution to the development of the telecommunications market in South-Eastern Europe and to access to IT technologies. The penetration of broadband access and mobile service is growing from year to year, but remains below the EU average. 

According to ART figures,   the number of broadband connections had risen to 143,000 in Kosovo by the end of the third quarter of 2012, representing a population penetration rate of 8.2 %. There were 1.7 million mobile telephony users at the end of the third quarter of 2012, translating to a population penetration rate of 96 %. The Group estimates that there were around 129,000 cable TV connections at the end of the third quarter, meaning a household penetration rate of 44 %.

The rapid growth in broadband connections has slowed in Macedonia . According to AEK figures there were 302,000 broadband connections at the end of the third quarter of 2012, translating to a population penetration rate of 14.7 %. The Group assesses that the household penetration rate will reach 63.4 % by 2017. The mobile telephony market is saturated, with a population penetration rate of 112 % at the end of the third quarter. The fixed telephony market continues to decline and is being replaced by mobile telephony. There were 408,000 fixed telephony connections at the end of the third quarter, meaning a population penetration rate of 19.9 %.

In Bosnia and Herzegovina, the Telekom Slovenije Group primarily focuses on cable TV, the internet and fixed voice telephony via Aneks.