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Fixed broadband operators rating in II’2012: changes in top-3 players

5 years ago

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Kyivstar has moved to the second place in the ranking with the total B2C and B2B subscriber base over the half-million. The IS{ reached the substantial increase of subscribers by a combination of factors: the use of the potential of small and medium-sized cities as well as the introduction of a new line of tariffs which are more expensive but have a much higher speed.

In the second quarter of 2012 continued to be the hot the topic of how to calculate the costs to dispose of telecommunications networks on the municipal property. However, the fears of market players about the need to increase the value of their services due to the introduction of such fees have not materialized. Authorities came into line with the wishes of the major providers about setting the same conditions for all as for the access to buildings and facilities for the construction, reconstruction and maintenance of house distribution networks. In the 2nd quarter again was a tendency to provide integrated services. Besides, theку was a trend of growth of demand for high-speed Internet which allowed some operators to increase the performance characteristics and costs of regular tariffs. Summer was also memorable by appearance of many initiatives on state regulation of the telecommunications market, as well as the renewal of IPTV licensing.

TOP-10  

According to the estimates of “E&C” (www.encint.com), the rating* of fixed broadband providers in terms of subscribers by the end of Q2 2012 is as follows:

Provider The number of subscribers, end of Q2 2012 The number of subscribers, end of Q1 2012
1 “Ukrtelecom” PJSC 1 453 600 1 407100
2 “Kyivstar” GC ** 520 400 477 500
3 “Volia” GC 501 000 491 200
4 “Triolan” GC *** 244 800 237 600
5 “Datagroup” PJSC ** 162 000 160 000
6 “Vega” GC 145 000 144 500
7 “NPP” Tenet” Ltd. 96 000 91 000
8 “Airbites” GK 78 000 76 700
9 “Fregat SP” Ltd. 77 800 75 000
10 “Frenet” LLC 77 100 75 500

GC – Group of companies.

* This rating is an estimate. «E&C» reserves the right to review indicators in the rating.

** The estimate includes all subscribers of the operator (natural and legal persons) including all member companies that provide the fixed broadband service.  

*** Includes all companies who previously worked under the brand “Triolan”. The indicators could be different because of the supposed restructuring of the group.

The results of previous ratings for the last 4 quarters can be found here: Q2 2011, Q3 2011, Q4 2011, Q1 2012.

«E&C» interviewed the  key market players and asked to describe the key market trends for the 2nd quarter of 2012 and to forecast what to expect in the future.

KYIVSTAR:

The broadband for households developing towards high-speed offers. Speeds of 1-2 Mbit / sec are no longer satisfy the customers. The widespread online opportunities for rest, entertainment, business and social interaction increased customer demands for high-speed access, regardless of the time of day. Therefore, the greatest increase of new connections is seen at providers who offer services with FTTB technology. “Kyivstar” significantly increased its subscriber base, breaking the half-million mark in the number of active households-users.

In the second quarter, “Kyivstar” updated tariffs line, increasing by 50% the speed of access in a number of tariff plans. Customers can order a high-speed internet at a convenient time of the day: “Turbo Week Night” and “Turbo Week Day”. Customers can switch on this service in addition to their basic tariff at any time when they want to work with large volumes of data and use the access speed of 100 Mbit / sec. It is economical and very convenient. “Home Internet” expanded partner program – in the second quarter it was joined by online movie theater Megogo.net, where customers can exchange their bonuses received for payments of the subscription fee for the “Home Internet” for discounts when downloading video content. Tariff plans are even more attractive to customers using fixed Internet and mobile phones of “Kyivstar”: the range of mobile phone numbers was expanded, for which customers of “Home Internet” may transfer their bonuses. Now the bonuses can be transfered to the mobile numbers of Beeline network.

Basic trends and key market news in the 2nd quarter of 2012:

The main news of the 2nd quarter – the changes in the ranking of the largest providers of broadband access. “Kyivstar” moved to the second place in the number of households served, and continues to lead in the growth of active users. This result was achieved thanks to the active development of the regions and the convergent tariff plans, which combine the advantages of a fixed-speed Internet and mobile communications. Every month about 400 thousand customers of “Home Internet” get bonuses on their accounts, which can be transfered to mobile phones Kyivstar, DJuice, Beeline. Customers are increasingly “call” by means of bonuses, thus expanding the possibilitites of mobile communication.

On the market of fixed Internet continuing previously initiated process of “legalization” of networks of small providers. The current legislation of Ukraine adequately protects the legitimate market participants. It is important that all providers operating in the legal field. For example, when connecting the buildings to the Internet networks, “Kyivstar” prepares technical project for each entity, which is coordinated with the Ministry of Emergency Situations, SES, energy control, balance holder of the building, local administrations. We also make payments for the rent of all in-house facilities and electricity.

Company’s plans for the next quarter:

In the near future – the expanding of benefits of the bonus program for customers. Transfer bonuses to mobile phones will be available to clients of Beeline. Recently there were introduced new solutions to control and check the balance of “Home Internet” with mobile phones by dialing a simple code.

Developing a network of “Home Internet” will be implemented in the cities where the FTTB networks already built (138 cities of Ukraine). We will also continue to provide our broadband Internet to more than 200 schools in Ukraine, which are connected to our FTTB network and get speeds of 10 Mbit / sec for the educational process. This is especially important with the new school year.

DATAGROUP:

Market volume of fixed broadband access to the Internet in Ukraine:  

As in previous years, now, the market of broadband access in Ukraine is developing unevenly. This is most evident when comparing the development in cities with over a million and a regional / district centers. Operators are actively building a network in regional centers and cities with a population of 200 thousand people. However, in cities with million-is there is tendency of price dumping.

Estimates of the market is ambiguous – optimistically, we estimate the market growth of 20%, realistically, we believe the growth of the market in Q2.2012 to Q1 2012 will be in the range of 11-12%.

We assume that by the end of the third quarter the market will grow by 10%.

Basic trends and key market news in the 2nd quarter of 2012:  

Nothing remarkable in the period from April to June was indicated. The second quarter of the year is traditionally considered the beginning of the holiday period, it is safe to say that the market enters a phase of stagnation in the summer, when the main task of operators is to keep the subscriber base at current levels.

A small increase was due to small towns and regional centers. Operators have launched summer promotional offers, whose task is not to increase the subscriber base but to keep the level of ARPU.

Company’s plans for the next quarter:  

In the telecom business it is difficult to plan for the quarter – we plan and forecast for the year. Yes, there are quantitative measures of success, such as the subscriber base, the level of ARPU, geography, which are quarterly plans. But basically – the communication requires large investments. In the short term – it will be the development of so-called “heavy content.” All the world’s telecom operators no longer live only on income from subscription fees, operators also earn on additional services. In Ukraine the development of content services is highly complicated, starting with licensing conditions and ending with a low culture of consumption – today our people will not pay the 5 hryvnia for quality, they will find in terrible quality, but for free.

When talk about the financial component, at the end of the year we want to increase the percentage of profits from the retail sector in the total income of “Datagroup”. In 2011, this figure was 37%.

TeNeT:

Basic trends and key market news in the 2nd quarter of 2012:  

The main events of the market can be called a mass campaign on digital television and, accordingly, the increasing interest to the potential of digital television. Also among the major market news, in our opinion, are: the introduction of new rules of providing and receiving of telecommunications services, the law on benefits for the IT-industry, and a new plan for the development of Ukrainian UA-IX traffic exchange point.

The main events of the quarter for the company TeNeT was the revision of all tariff lines for home and business. In addition, we have significantly expanded TeNeT’s WI-FI ZONE network.

Company’s plans for the next quarter:

Telecommunications company TeNeT will continue to follow the principles of stability, quality, complexity, innovation and user-oriented services.

We are currently working on the creation of new specialized service of interactive digital television, addressed, foremost, to families with children. Also in the third quarter of this year, we plan to launch a joint Television project with the Ministry of Internal Affairs of Ukraine in Odessa region.

In addition, we are working to expand the geography of services. And we continue to support the major cultural events in Odessa, for example, the Odessa International Film Festival.

Currently in the final stages of testing is social initiative of TeNeT company to provide free public access to useful online resources in Odessa «City Public Internet Access». Free access to Internet resources is provided by the WI-FI technology on the basis of project TeNeT WI-FI ZONE. Currently TeNeT WI-FI ZONE is in all popular cafes, hotels, clubs and restaurants in Odessa, as well as in the green areas of the city.

VOLIA:

Basic trends and key market news in the 2nd quarter of 2012:  

This quarter was marked by the numerous projects and initiatives in the area of state regulation of the market, who moved into the “active phase” in July were published the regulations (or the related projects were released for public comment), the appearance of which telecom operators resisted for years.

In early July, is was tabled in the government the bill “About creating a fund of publicly available telecommunications services”, which assumes a new fee, charged on the price value of all telecommunications services in the country, at 3.5%. The result of these initiatives, which are firmly against telecommunications operators, is increase of cost of services for the population. This, in turn, – negatively affect the development of the market and will strengthen the shadow economy segment.

Another initiative of one of the deputies – the bill to support the development of cinematograph, which suppose the introduction of changes to the tax code and the introduction of an additional tax, which will be paid into a special fund by all operators and providers of telecommunications. It will be 2% of turnover net of VAT.

This initiative has also come under sharp criticism from the market. According to participants, the cinema must be developed by providing tax incentives to those who invest in the production of domestic films, rather than the introduction of new taxes, especially in the telecom, who plays the role of transport in this context. The result of such a solution would be the increase of the share of the shadow economy segment and increase the price of legally existing operators. And thus because of the two factors will be reduced the tax base, not only due to this tax but due to others like VAT, income tax, and therefore – there will be losses in the budget.

Very resonant in the second quarter of 2012 remained the subject of calculating the costs of placing telecommunication networks on municipal property, which is now is setted by special utilities created by city council in different regions (“Methods of calculating fees for the placement and operation of telecommunications networks and equipment in residential and commercial buildings, municipally owned by the city and the order of its use “). For a long time the telecom operators defended the need to establish uniform rules and calculation methods of access. However, on this issue in July were seen the positive changes. In particular, on July 26 NCCIR approved the draft resolution of the Cabinet of Ministers of Ukraine “On Approval of access operators, providers of telecommunications to the housing assets of all forms of ownership for organizations and community-based construction and installation work to ensure consumer access to the Internet.” These rules define for all operators and providers of telecommunications the same terms of access to buildings and facilities for the construction, reconstruction and maintenance of house distribution networks. The document approved by  NCCIR cites numerous appeals of associations operators, service providers, telecommunications operators and multichannel TV networks to building owners and local governments.

The positive aspects include the fact of reaching a compromise with the  NCCIR on introducing important amendments to the draft document “Rules for the activity in the field of telecommunications” (service activities in the field of Internet access). The document was approved by the NCCIR after discussions with representatives of the telecommunications market, professional societies and associations.

Company’s plans for the next quarter:  

To continue network and equipment upgrade to maintain the high quality characteristics of services. Among the notable changes in this direction – the modernization of networks across the country, providing a high-speed Internet access and stability of service as a whole.

In addition to a significant investment in the development of Internet services, in this year in its covered cities Volia continued the implementation of digital television and high definition television. Today, in 15 cities the subscribers use our digital TV, and in 13 of them have already successfully been launched a TV in high definition. And in some regions, where we use the DOCSIS protocol, conducted the necessary technical work for the implementation of the new DOCSIS 3.0 standard and increase of the speed to 150 Mbit / sec (in particular, the DOCSIS 3.0 standard launched in August in Simferopol).

FREENET (O3):

Market volume of fixed broadband access to the Internet in Ukraine:  

We can’t really estimate the size of the fixed broadband market in Ukraine due to the fact that a large part of the market is still in the shadow. According to the State Statistics Committee of Ukraine the market for access to the Internet for the first half of 2012 amounted to 2.29 billion USD.

Because of the seasonal decline and increased number of subscribers which suspended the services in the summer, the customer base size rose slightly (incl. Freenet).

Basic trends and key market news in the 2nd quarter of 2012:

Market has entered a period of seasonal decline, revenue growth rates are falling, despite an increase in the number of subscribers.

Company’s plans for the next quarter:

Freenet plans to actively develop in the cities of its presense. The company connects to its network of no less then 100 homes per month. One of the priorities – the active acquisition of local providers.

The company’s activities are focused on expanding coverage, houses base and on increase the rate of growth of subscriber base.

Recommendations / initiatives / wishes to the participants of the market:  

We recommend to market participants to conduct well-thought-out pricing policy in order to prevent further decline of profitability and investment attractiveness of the industry.

Source: Expert & Consulting (www.encint.com). Reference to the source is obligatory.