Thursday, April 22, 2010

Mobile Broadband Market in CEE post for huge growth ? But contribution margin?

Interesting article from Frost & Sullivan in terms of Mobile Broadband development in Central and Eastern Europe (CEE) region (the cover 5 countries Czech Republic, Hungary, Poland, Russia and Slovakia)

Frost and Sullivan full article

In their opinion and although CEE markets differ considerably in terms of mobile broadband penetration, technologies, and network coverage, the common point would be significant market growth expected within the next five years.

Frost & Sullivan notes that the market earned revenues of euro 1.1 billion in 2009 and forecasts this to reach euro 5.2 billion in 2014. The service penetration is expected to grow from 2 per cent to 10 per cent within the forecast period.
"Due to relatively low overall broadband penetration, mobile broadband will be a complementary rather than supplementary service to fixed broadband in CEE countries,"
"Therefore, mobile broadband operators should initially focus on improving the service quality through sufficient network upgrades as customers expect the same download speed and data download limits as from fixed broadband internet. ..."
"Most of the market participants start mobile broadband service development from large cities' centres, where they can count on relatively quick return on investment,"
"... growth potential will be mainly visible within rural areas, where overall broadband penetration remains relatively low. Therefore, focusing on this target group can be a worthwhile consideration,"

It is interesting the observations made by Frost & Sullivan, however while revenues are important, we believe that it misses the point on margin contribution. CEE and overall Eastern Europe is way more competitive in pricing than Western Europe, therefore the revenue per subscriber being much lower while the investments to reach those customers are very similar and yes their expectations in terms of quality provided are very high

So yes we need to combine both complementary and supplementary access, while optimizing our network cost, managing to off load traffic and not forgetting that a lot of the Mobile Broadband growth could come from the small screen and not the laptop....
...because another area that it is not mention but F&S is that laptop and PC penetration is lagging far behind western Europe and the crisis has basically kill the growth trend here. Many people may go for the SmartPhone instead of the Laptop

On this regards Pyramid research believes that PC penetration will grow quite dramatically (from 12% in 2004 to over 50% in 2014) as "...
the European Economic Recovery Plan aims to boost investment in predefined strategic sectors, including by contributing to broadband network expansion in rural areas of EU member countries in CEE"

Pyramid Research full article

But again internet strategy (for the mobile phone, for the computer and for the business) is a clear growth area and where Mobile Operators needs to be more focused and creative and find their clear value proposition

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