2010 Lithuania - Telecoms, Mobile, Broadband and Forecasts

Since independence Lithuania embraced market reform and joined the European Union overseeing rapid economic growth characterised by large real wage increases driven by declining unemployment and emigration, EU sourced development funds and extremely rapid credit growth. Like its Baltic neighbours to the north the global financial turmoil brought a sudden end to Lithuania’s boom, with eight years of consistent annual growth giving way to 14.8% real GDP contraction in 2009, with EU estimates of a further 0.6% contraction for 2010.

Lithuania’s telecoms market did not escape the effects of the economic downturn, contracting by 7.7% during 2009, smaller compared with the overall economy due to the utility nature of telecoms and communications services. Not all sectors of the communications market were affected equally; falls in revenue from fixed and mobile telephony were offset by increases from broadband, data transmission, leased line services and wholesale fibre access.

A number of alternative operators offer services in the liberalised fixed-telephony market although incumbent TEO is still the dominant operator. Fixed-line subscriber numbers are expected to continue trending downwards in 2010, attributed to fixed-to-mobile substitution, although fixed-line broadband services provides an incentive for consumers to hold onto fixed lines, which forms the basis of the incumbent’s future growth strategy.

Broadband accounts for 99% of all fixed Internet connections. Infrastructure-based competition has led FTTx to overtake ADSL to become the most popular fixed broadband access platform. Fibre is expected to represent a growing proportion of total fixed broadband subscriptions in 2010 due to the continued focus on fibre by both the private and public sector. With Internet access now commoditised, service providers have shifted focus to Internet-based convergence services such as broadband TV (IPTV) or bundled separate services to increase average revenue per user levels.

Widespread Internet usage has fostered Lithuania’s Internet society, the application of ICT to improve social and economic development, with various e-commerce, e-government, e-education and e-health initiatives underway and services available. A burgeoning digital TV market is evident due to the transition to digital-only broadcasting, with the telecoms incumbent well positioned for digital TV subscriber growth in 2010 due to its involvement in both IPTV and digital terrestrial TV.

Most Lithuanians possess a mobile phone and multiple SIM card ownership has pushed penetration levels beyond 100%. Services are offered by three mobile network operators and a number of mobile virtual network operators. Mobile broadband represents the next growth opportunity, building on past investments in 3G and HSDPA networks.

Market highlights:

• Fibre is the most popular fixed broadband access platform. Unlike the ADSL market competition is much stronger as the incumbent only represents a quarter of total FTTx subscriptions. Growth prospects for fibre are strong due to ongoing deployments by both the private and the public sector. The latter approved in late 2009 the second phase of the publicly funded rural fibre backbone network, Rural Area Information Technology Broadband Network.
• Widespread business usage of e-government services is evident, with an estimated 90% uptake in 2010 as businesses take advantage of the ability obtain information, forms and return forms online. Private uptake of e-government lags but is expected to grow on the back of increased awareness and recognition of its benefits. 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.
• Digital TV is expected to represent the majority of pay TV subscriptions in 2010. Telecoms incumbent TEO is well positioned to take advantage of the growing interest and uptake of digital TV services, given that it offers both IPTV and DTTV services.
• Mobile broadband is the focus for mobile network operators, with take up of HSDPA-based mobile broadband penetration at an estimated 8%. 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, in turn leading to some cannibalisation of broadband subscribers between the fixed and mobile markets.

Lithuania key telecom parameters – 2009 - 2010

(Source: BuddeComm based on industry data and estimates)