Latvia - Telecoms, Mobile, Broadband and Forecasts

Additional Information

Like its Baltic neighbours Latvia enjoyed economic growth based almost entirely on domestic demand, based on large real wage increases driven by declining unemployment and emigration, European Union sourced development funds and extremely rapid credit growth, resulting in high inflation and a property market bubble characterised by growth rates among the highest in Europe.  

In stark contrast an economic contraction is expected in 2009 due to the current global financial turmoil. Latvia’s telecom market was the recipient of much foreign capital, with high rates of foreign ownership among major market players. Unlike other industries the overall telecom industry is expected to weather the economic turmoil relatively well, due to the essential nature of most telecom services.

  Not all sectors are expected to fare the same, given ongoing trends such as fixed mobile substitution and the increasing popularity of fixed and mobile broadband services. Broadband services are widely available and account for almost all Internet subscriptions. DSL is the dominant form of broadband access, with competition predominantly infrastructure based such as cable, Fibre-to-the-Home, and wireless broadband is also available.

  Latvia’s wholesale broadband has seen less success, with the number of lines retailed via bitstream, local loop unbundling and simple resale woefully inadequate, due to the regulator’s previous inability to facilitate a viable wholesale market.  

A healthy digital TV market is evident, with content accessible via well entrenched cable TV operators, satellite and broadband TV (IPTV). Bundled offerings such as triple play or quad play have been launched by the cable operators and the telecoms incumbent.

  Fierce competition from a number of GSM, CDMA and WCDMA networks by four mobile network operators have pushed SIM card penetration levels beyond 100%. To grow revenue, service providers are focusing on increasing usage and hence revenue per subscriber, mainly in the form of minutes of use and marketing of mobile broadband services. The latter holds much promise given current low mobile broadband penetration levels, widespread familiarity and usage of fixed broadband and the falling cost of multimedia capable mobile handsets and modems.

  Key highlights:

•          Broadband accounts for almost 100% of all fixed Internet subscriptions. Potential opportunities in this market have led Latvia’s incumbent operator to announce plans to roll out FTTx networks within Riga under its ‘Network of the Future’ project, offering speeds of up to 500Mb/s by 2010. FTTx rollouts are planed for other major cities. Currently the incumbent is the dominant ISP with its DSL offering accounting for almost half of all fixed broadband subscriptions.
•         Business usage of e-government services has exceeded 40% and is increasing annually, with access via a central portal. An increased focus on online services such as e-government is evident, as service providers hope to capture benefits such as improved efficiency, convenience, and accessibility. Similar initiatives extend to the health and education sectors, with the scope of such initiatives expected to broaden due to EU commitments to online services.
•          Stalled efforts to introduce digital terrestrial TV are back on track following implementation of regulations for introducing DTTV services based on the DVB-T and DVB-H standards. Latvia’s incumbent operator won a tender in January 2009 to operate Latvia’s DTTV broadcasting infrastructure, building on its previous launch of IPTV services and placing the incumbent in a prime position to benefit from the nascent digital TV market.
•        Mobile broadband is the next growth opportunity for mobile network operators, with mobile broadband penetration hovering at only 8%. Healthy infrastructure-based competition is evident with competing offerings from WCDMA and CDMA operators. Further competition is likely given that state-owned Latvian State Radio and Television Centre (LVRTC) deployed a trial IEEE 802.16e standard mobile WiMAX network in Riga during 2008.
•        The future growth path of mobile broadband take up is expected to emulate that of the mobile voice market over the coming years as the cost of access and capable handsets decrease and end user awareness and ease of use increases.