One of the most dynamic and most competitive markets in Serbia is certainly the telecommunications market. In recent years, it has experienced a certain consolidation and consolidation, and now there is an announcement about the entry of another major player in the markets of fixed telephony and cable operators. Whether there is room for that, what the benefit of the end user from that is and in general what is the quality of provided telecommunication services on our market, we talked for BIZLife portal with Slobodan Markovic, Digital Advisor in the United Nations Development Program in Serbia (UNDP).
These days, it is one year since the outbreak of the coronavirus virus and the changed circumstances in which markets and companies operate, including telecommunications. How did this kind of crisis affect a specific sector in Serbia? Are some processes slowed down?
In the first days after the declaration of the state of emergency last year, most of the citizens stayed at their homes and were forced to make many more phone calls, exchange messages, and use the Internet. The networks of all operators were under great pressure, but they managed to withstand that rush. Operators, meanwhile, have increased the capacity of their networks, so they have managed to adapt to the new situation, which means increased traffic during the day due to work from home.
Increased use of telecommunications services and a stronger focus on digital transformation will certainly benefit the development of the market in the medium term. On the other hand, the prolonged duration of the pandemic has made business uncertain and made planning difficult, which is why some operators are now cautious with investments. However, I do not see that this will leave more serious consequences for the sector. I do not see an alternative to further investment in technologies such as next-generation optical and mobile networks, which should support many incoming trends – from increased digital transformation and e-commerce, through the development of new Internet services in various fields, to the increased need for automation of production domain, autonomous vehicles, etc.
How would you assess the current state and situation on the telecommunications market in Serbia, is it consolidated or is there room for some new players?
Our market is characterized by a high level of concentration. You will hardly find a market segment in the field of telecommunications where the first two or possibly three operators hold less than 70-80% of the market. Resources needed to enter the market – primarily in terms of capital investment in infrastructure, licensing costs, marketing, etc. – They’re big. On the other hand, the total number of users in Serbia and their economic power have their limitations. Above all, the state has not done enough all these years to speed up competition. So it is not at all easy to enter the market and make a significant difference. This is perhaps best seen in the example of Vip as the third operator in mobile telephony, which took more than 10 years to build a solid market position.
In technical terms, there is certainly space and this is not a problem, even when it comes to 5G. In economic terms, the situation is, as I mentioned, somewhat different. In a study he did for RATEL regarding the granting of 5G licenses, the ETF assessed that there was no economic justification for the new mobile player. I would still leave that decision to the market, especially having in mind the publicly expressed intention of the new players to apply for a 5G license.
As for smaller players and their cooperation with large operators – the development of fixed and mobile networks of the new generation entails changes in the internal organization of operator networks, opens opportunities for new ways of providing services, new applications, new partnerships with the IT sector… there is certainly development on several levels.
When we talk about existing players, it seems that the market, as far as end-service providers are concerned, has become quite polarized after a series of acquisitions in the last few years, to two large companies and others smaller. Can we talk about the realized benefit for the end consumer in that constellation of forces and what would it be?
Larger operators can bring a more diverse and quality offer of content, more services for the same or less money and everything else that comes as a result of economies of scale. However, when there are a small number of competitors, then the market dynamics are weaker. This results in operators expanding the network more slowly, offering services that are very similar to the competition, innovating more slowly, and users not seeing greater benefits from concentration. In our country, the situation is such that in most cases, the choice of users is very narrow, and when they have it, they can choose between very similar, slightly better or worse offers.
What is the quality of the Internet in Serbia, we have witnessed numerous complaints about the speed and constant quality of previous months, in terms of homework, or home office? And can it be improved with new services, with the introduction of the 5G network, how widespread is the optical internet?
I would say that, in general and statistically speaking, the quality of the Internet in Serbia is solid. Most users today have xDSL and solid speed cable internet. 4G mobile internet is also widely available in Serbia. Telecom has dramatically accelerated the development of the optical network in the last few years. Cable operators, which have long been a major factor in the development of high-speed internet in our country, continue to invest in optics. Last year, the state also launched a program to build optical infrastructure to those areas where there is no operator infrastructure.
As for 5G, I think it is wrong that the auction for 5G frequencies is postponed. First of all, because the auction is only the first step in a multi-year investment and development cycle. The longer the beginning of that process is delayed, the worse. The world and the environment, of course, are not waiting for us – Hungary and Greece, for example, have assigned frequencies, the transition to 5G has largely begun in Budapest and many cities in Greece…
I do not expect that the new generation of mobile networks will bring some dramatic changes visible to end users at first. However, the domestic industry and IT startups have a chance to develop products and services that will give them a place in global technology flows related to next-generation mobile networks – from gaming, virtual and augmented reality, through remote control and production automation, to autonomous vehicles. Just as we did not see the real power of the 4G network until smartphones appeared with various applications that we use every day, so we will not feel the real power of the 5G network until there are applications and services that will take advantage of its new features (much faster data flow, much faster network response and many more devices that can connect and communicate with each other).
Recently, a consulting house reported that the average resident of Serbia spends about 50 euros a month on telecommunications services, which is 10 percent of the average salary and that it is not about small allocations, so that there is a real small war in the telecommunications market. How do you see that?
As for the current “war”, I am sorry that in the media it is presented in an extremely simplistic way and with a lot of politicization it is reduced only to the media field. The reality is that Telecom has invested a lot in optical infrastructure in recent years. That infrastructure should be used instead of ending up empty. One way to achieve this is to rent infrastructure to other operators. Telecom was given the opportunity to pay off its large investment faster, and Telenor was given the opportunity to offer its customers a far more attractive package of services than the mobile one it now has. This agreement, as far as I could see from the media, was concluded on a non-exclusive basis, which is also good. I see this as a breath of fresh air in a market where the largest operators, including Telecom and SBB, have for decades kept their fixed networks and facilities strictly closed to competition or opened them on a spoon and under very restrictive conditions.
On the other hand, although I believe that this agreement cannot dramatically and quickly jeopardize SBB’s network, significant position and market share, the state in regulatory terms must do much more in terms of creating equal conditions for competition in the field of telecommunications. For example, bureaucratized and uneven rules for the installation of optical and mobile infrastructure in municipalities, unequal access to infrastructure in buildings or discriminatory conditions for access to infrastructure of public and utility companies (such as cable ducts, lighting and electricity poles, etc.) are just some from things that many operators have been complaining about for years. Also, if a new operator wants to apply for a 5G license, it should be allowed to participate in the auction.
On the other hand, at the end of the year, we had information from research in the region that the Internet in Serbia is the cheapest in the region. How do we rate ourselves in terms of telecommunications services and how in terms of the quality we get for that?
It depends on what the region is. If Southeast Europe is observed under the region, then according to the largest number of parameters, we are approximately in the lower half. If you look at the former Yugoslavia, then we are somewhere in the middle. If it is what is called the Western Balkans, then we are at the top. But the official statistics in the field of telecommunications are quite basic and give some general summary picture. Someone who has a couple of operators with cable and optics at their location, good coverage with a mobile signal – there is some choice and there is a greater chance to get solid quality for the price paid. Someone who has only a DSL option or a bad wireless signal at their location, gets a far more modest service for the same money, BiF reports.
