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Slovenia has four mobile operators (Mobitel, Si.Mobil, Tusmobil and T-2) and two MVNOs (Debitel and Izimobil). Since the launch of Tusmobil in 2007 and, UMTS-only network, T-2 in 2008, competition has increased dramatically and incumbent Mobitel has had to reconsider its positioning.
The Slovenian Government owns 52.54% of Telekom Slovenije, Mobitel’s parent company. In addition the nation owns a further 21.61% through other state funds. The group also has an operation in Kosovo, under its IPKO brand, which reported losses of EUR9.4 million in 2008 and EUR2.5 million in 1Q09. Since 2007, there has been talk of privatisation but the government has failed to attract sufficient interest. In 1Q09, Mobitel represented 56% of Telekom Slovenije’s net profits in Slovenia (EUR9.7 million) against 60% a year earlier.
Between 1Q08 and 1Q09, Mobitel has seen net sales decline by approximately 10% to EUR98.7 million whilst its profit margin fell from 16% to 9.8% over the same period. Mobitel has been losing market share for the past six quarters with its installed base declining by 1% on average every quarter since 1Q08. We estimate that its market share has declined to 61.9% in 1Q09 compared to 69.2% a year ago.
The troubled operator recently announced that it is facing fierce competition and is struggling against high churn. In its latest statement, Mobitel talked about the “decline of its reputation among the technologically advanced and price-sensitive younger generation” and admitted to having been “forced to offer new, favourably-priced packages”. As a consequence, the market leader started to review its portfolio mix and launched its “itak dzabest” offer aimed at the age 15-30 youth market. The offer, which includes 1GB of data, was supported by a series of marketing events and loyalty programmes. At a group level, Telekom Slovenije increased its allowance for Mobitel’s capital expenditure by 27% year on year to EUR12.4 million to improve its network quality and services.
Si.Mobil, 100% owned by Telekom Austria Group, is the second largest mobile operator in Slovenia with 30.1% market share. The operator’s connections base has been increasing by an average of 14% on a yearly basis since January last year to reach 582,000 in 1Q09. In its last statement, Si.Mobil recognised that there is still room for innovative data products in Slovenia but also reports that competition has led to price elasticity challenges. Si.Mobil and Mobitel both increased their minutes of use per user per month by tiny margins but lower priced tariffs led to a decline in effective price per minute to EUR0.16 compared to EUR0.2 in mid-2008. This amounted to an 8% decline in average revenue per user to around EUR22. In 1Q09, Si.Mobil’s EBITDA decreased by 30% to EUR10.3 million due to an increase in material expenses and in marketing and sales costs.
In 2007 Tusmobil arrived through the purchase of the license owned by Vega, the subsidiary of Western Wireless International, which ended its operation in Slovenia in 2006 due to poor results. Tusmobil is estimated to have 7.3% of the Slovenian total connections. In April 2008, the Post and Electronic Communications Agency (APEK) stated that it had issued the fourth 3G license to Tusmobil without public tender and at no cost because of the lack of interest from other parties. Two months ago, Slovenia’s Commission for the Prevention of Corruption supported an allegation that Tusmobil’s 3G license was awarded “unlawfully” and that APEK broke the rules.
T-2, the UMTS-only network, launched its commercial operation in June 2008. Despite a market share of just 0.65%, this new entrant has introduced very aggressive pricing alongside innovative data tariffs. In March 2009, it introduced its “My Auditorium” service that allows users to control multimedia content via their TV or UMTS device. T-2 offers a voice subscription for EUR4 a month and a data plan that costs EUR10 per month.
APEK has managed to change the landscape of Slovenian telecommunication market by increasing the level of competition through 2008. The regulator conducted consumer research in September 2008 and found that two thirds of all respondents had considered changing their subscriptions because monthly costs were too high. Results showed that household expenditure on all electronic communication services stood at EUR41.95 in September 2008 which is 4.6% of the average Slovene monthly net salary. Since the launch of new entrants, the regulator also noted the widespread introduction of convergent services with triple-play connections rising by 25% in Q4 last year. Mobile number portability (MNP) was introduced in 2006 and triggered 85.075 mobile number ports in 2008. The largest winners as a result of MNP were Tusmobil, followed by Si.Mobil, Mobitel, Izimobil (MVNO), T-2 and Debitel (MVNO).
Joss Gillet, Senior Analyst, Wireless Intelligence
Market trends in Slovenia reflect similarities with neighbouring countries such as Slovakia, Czech Republic and Hungary. All these markets are close to or have already exceeded 100% mobile penetration; with growth driven by replacement and operators’ future profits depend on their ability to differentiate through Value-Added Services. APEK has proactively acted on stimulating the market and changed the landscape through increased competition. New entrants have introduced innovative tariffs and forced the incumbent operator to react and switch its focus to customer retention. By imposing such market dynamics, the regulator can now implement its strategy for tackling the digital divide. In the interim, operators will have to closely monitor price elasticity and move away from voice-centric strategies and there is still plenty of room for growth in the contract space.