Croatia Telecommunications Report Q3 2012

BMI's Q312 report on Croatia's telecommunications market contains an analysis on the latest trends and developments in the mobile, fixed-line and broadband markets. It also contains our latest forecasts for mobile, fixed and broadband subscriber levels and growth to 2016. Our market analysis and five-year forecasts are based on the most recent available figures to be published by Croatia's telecoms regulator, the Croatian Post and Electronic Communications Agency (HAKOM), covering 2011, and by the country's leading network operators for the three months to the end of March 2012. In addition to forecasts and the latest data analysis, it provides an update on recent developments in telecoms regulations.

The Croatian mobile market continued to contract in Q112, a consequence of market saturation, a difficult macroeconomic environment and regulatory measures. In the first three months of 2012, there was a net loss of 110,000 mobile subscribers as total subscriptions declined to 5.036mn, equating to a penetration rate of 114.6%. The net loss in Q112 was the fourth successive quarter of net subscriber losses that have seen the market contract by a total of 1.41mn (largely due to the regulatory change introducing the 90-day active subscriber definition). The penetration rate at the end of March 2011 was 145.4%. BMI expects performance to improve relative to the past year; however, growth will be limited by the ongoing macroeconomic challenges. We forecast 5.297mn subscriptions at YE16, with a penetration rate of 121.7%.

The fixed-line market also experienced marked decline in recent quarters, with total subscriptions down 14.1% y-o-y to 1.603mn in Q112, according to data from HAKOM. We expect the rate of decline to decelerate over the duration of the forecast period with total subscriptions falling to 1.548mn and a penetration rate of 35.6%.

The broadband market in Croatia has outperformed mobile and fixed line in recent quarters, with total subscriptions increasing 0.8% y-o-y to 1.146mn at the end of 2011, according to HAKOM. The fixed broadband market has continued to grow strongly while the mobile broadband market declined 12.3% y-oy.

The decline in mobile broadband is the result of the macroeconomic environment, the expansion of fixed broadband service penetration and subscribers leaving the service after the end of introductory promotions.

Meanwhile, fixed broadband subscriptions grew 6.1% y-o-y to 858,020 in Q112. BMI believe the additional competition from VIPnet has catalysed growth as it targets wireline services at its mobile subscriber base following the acquisition of B.net. Competition from an additional operator able to offer fully bundled mobile, fixed, broadband and pay-TV services in competition with T-HT has made the market more dynamic and we expect medium-term growth in both broadband and pay-TV services.

The major development in terms of regulation of the telecoms sector was around the broadband sector. In May 2012 HAKOM confirmed that it planned to hold the auction for digital dividend (790-860MHz) spectrum in H212. It added in a statement to local press that it hopes the frequency auction will raise several hundred million kuna; however, actual prices and auction rules are yet to be confirmed at the time of writing. The government is targeting the expansion of broadband services, of which LTE will make a major contribution. There were unconfirmed reports in the local press at the time of writing that the government was also considering rescinding the 6% telecoms tax in 2012 that could be used in conjunction with LTE spectrum licensing to incentivise network roll-out.