Czech telecom majors react as market positions starts to erode

In the telecoms sector, the Czech Republic has not looked like a model market as far as giving the customer a better deal. But there are signs that the squeeze is being put on some of the big operators on the market and they are being forced to make changes. T-Mobile has just wrapped up its latest step and its peers are likely to follow suit.

Photo: Filip Jandourek

For long the telecom market in the Czech Republic looked like a triumvirate composed of T-Mobile, Telefónica, and Vodafone. There had been talk when the last multinational company jumped into the market in 2005 by buying out the Oskar company launched by Canadian telecoms company TIW that three big players would mean real competition and low costs. That hope proved to be a mirage. The big players settled in and the Czech telecoms regulator sat by and took a passive role.

They are now signs that that cosy situation has evolved. The regulator, though not a fearsome sabre tooth tiger, has been more active, competitors on the market have burgeoned and high telecoms charges are on the slide.

A snapshot of the first quarter results one of the Czech big three T-Mobile, the daughter company of Deutsche Telekom, says a lot. The company boasted growth in customers for of all its three main segments, fixed lines, broadband, and mobile, of around 6 percent in the first three months of the year compared with the same period a year earlier. But year-on-year revenue was just over 10 percent lower at the start of 20014 compared with the same period in 2013.

Telefónica’s Czech net profits were almost halved in the first quarter of this year with tough competition and consumers’ willingness to change companies and head for the wide range of virtual operators now on offer. Vodafone saw its local earnings drop in the 2012-2013 period compared with the previous year.

So, in spite of the squeeze, some companies are taking another look at their local operations and working out how they can increase their earnings, strengthen their position, and simplify their structures and costs.

Deutsche Telekom’s final acquisition of Central European telecoms operator GTS, announced on June 2, with plans for the operational merger to be completed by October and all the legal changes wrapped up by the end of the year, is one move in this direction.

GTS which makes a lot of its premium income from providing telecoms services for businesses and high speed data transmission thanks to optical cables and data stations also has around 50,000 mobile customers through its operations as a virtual operator.

The European Commission which probed the impact of the buy-out over the five countries where GTS is active said there was no reason for concern that a major alternative operator was being swallowed up. On the Czech market, where the examination centred on calls within the country, the Commission found no competition issues to address there, pointing to the more than 50 virtual operators, who hire access to telecoms networks from the main players, on the market.