Bulgaria: 850,000 broadband connections, but BTC continues to dominate fixed telecoms

[official wire] The Bulgarian incumbent fixed-line operator Bulgarian Telecommunications Company (BTC) has been privatised and is owned by American Investment Group (AIG).

However, this has not coincided with an equivalent degree of liberalisation in the fixed-line and ADSL sectors, both of which remain dominated by BTC. Although a number of alternative operators do exist, high prices and other difficulties with regards to access to the incumbent’s network appear to be derailing competition. This has resulted in spritely activity in alternative broadband technologies, with local area networks (LAN) being the most dominant, accounting for around 57% of the broadband market at the end of 2008. There are also a number of wireless broadband technologies available such as WiMAX from operators like Nexcom Bulgaria. At the end of 2008, there were over 850,000 broadband connections in Bulgaria, up from around 560,000 at the end of 2007.

The merger between Bulgaria’s two largest cable operators, Eurocom and CableTEL, has still not been re-established after it was postponed due to the financial crisis. However, reports suggest that the relevant parties are still interested in merging and the report is optimistic of negotiations reigniting. The merger would be of huge benefit to the broadband sector, creating a player large enough to pose a threat to BTC, and helping to drive the cable market forward.

The fixed-line sector has continued to decline in 2008 with BTC reporting a 9% fall in fixed-line sales. At the end of 2008, we estimate that there were just over 2.2mn fixed lines, representing penetration of 29.3% and an annual subscriber decline of 3.7%. Going forward, we expect this rate of decline to slow as several promising factors come together. The regulator seems keen to encourage greater competition, mobile market growth is slowing which should result in less fixed-to-mobile substitution, and heavier marketing of bundled services should help to stem the decline of the fixed-line sector. Nevertheless, we still expect it to fall as broadband access is expanded, spreading the availability of VoIP services and better postpaid mobile tariffs result in customers continuing to drop fixed lines in favour of mobile services.

The mobile sector grew by just 6.5% in 2008, a poor performance after the 24.7% growth rate seen in 2007. The market saw a large net loss in the first quarter of 2008, which we believe resulted from the mobile operators discounting inactive SIMs. At 3.5%, growth in the final quarter of 2008 was strong compared to the rest of the year, with 383,000 net additions. However, going forward we expect to see growth rates continuing to decline. As well as penetration being among the highest in the region, at 142.8% at the end of 2008 and the risks of further discounting of inactive SIMs, the country’s two largest operators are concentrating on migrating their prepaid customers to postpaid contracts. Mobiltel, the market leader, and second largest operator Globul both saw the proportion of postpaid customers in their subscriber bases breach the 50% mark in Q408. This chase for higher value customers will result in less concentration on subscriber growth, leaving room for Vivatel and mobile virtual network operators (MVNOs) such as Petrol Mobile to sweep up prepaid customers. However, as competition for postpaid customers increases, tariffs will fall, resulting in fewer prepaid growth opportunities.


At The End Of 2008, There Were Over 850,000 Broadband Connections In Bulgaria