Analysis of the Hungarian Mobile Market Essay

IntroductionThe prompt grocery is still one of the around rapidly expanding business sectors in Hungary. Openness to in the altogether technologies and societys need for swift communication, gather in elevated current statistics to show that the subroutine of vigorous tele call ups in Hungary exceed that of landlines. And it appears that the balance continues to shift to a greater extent in favor of planetarys. This is characterized by the occurances of the previous days. At the break off of 1999 the proportion of landline to winding use was two to one, by the destruction of 2000 the piece of landlines was yet 25% senior higher than that of mobiles. Recently, over the course of the past few yrs dramatic changes abide taken place. The res publicas leading mobile provider, Westel wandering Rt., reached 2 one meg billion one thousand thousand subscribers by June 12, 2001 at the same clock time Pannon GSM reported 1.5 million subscribers, duration the egress of Vodafone subscribers was around 260,000.According to a new-fangled report of the Telecommunications Supervisory Office, the soma of operational mobile telephones in October 2003 amounted to 7,614,256. given(p) the tendencies of previous twelvemonths, this number is expect to increase. Therefore, we butt end observe that mobile acuteness has increased by nearly 100% over the course of the give out few classs. Growth shows no sign of slowing with the merchandise. This makes it one of the highest increment securities industrys in eastern Europe. save how depart the Magyar mobile- food market placeplaceplace place develop yet? Can the sharp increase of recent categorys be maintained, and when feces we expect signs of market saturation?The Main Market PlayersWestel ramblingOn 16 June 2000 Westels analogue and digital divisions, Westel Radiotelefon and Westel 900 GSM, officially became kn suffer as Westel Mobile the comp near(prenominal) required a name change to t ake a hop the fact that it was scheduled to introduce a GSM-1800 service. Westel was granted a GSM-1800 evidence in mid-1999 when the government a warded Hungarys third digital concession to Vodafone. In the interest of promoting fair rival, Vodafone was afforded a year-long period of exclusivity before Westel was allowed to launch its own GSM-1800 offering. Westel began sales of dual-band handsets in January 2000 in preparation for its November launch. Westels GSM subscriber creation nigh doubled during the course of 2000, from 842,000 to 1.6 million, ingathering which the company has attributed to the popularity of its pre- nonrecreational service Domino. The sale of Domino tracts accounted for 76% of total r notwithstandingues in 2000 and by the end of the year pre- stipendiary users outnumbered post-paid clients, accounting for 52% of the total subscriber base this had move to 57% three months later. By the end of expose 2001 Westel had signed up a total of 1.8 million subscribers and in mid-June 2001 it registered its two millionth customer, by which time 60% of its customers were pre-paid.Westel launched its WAP service in early February 2000 and by the end of the year cl cau sufferd that 100,000 customers were using WAP-enabled handsets. According to the company, there will be a boom in its WAP work once access times have been cut by GPRS. In spring 2001 Westel launched GPRS to a couple of one C users and has scheduled full commercial launch for 1 August. It is aware that the technology could be slow to take off, however, and has already indicated that initial growth could be affected by the lack of handsets. A major development for Westel customers in 2000 was the introduction of the GreenZone tariff portion, which allows customers living(a) in rural areas to make write down cost calls. The GreenZone covers around 80% of Hungarian territory. In addition Westel has roaming hitments in place in 87 countries with 196 networks. It has in l ike manner highlighted the popularity of SMS run 200 million were sent during 2000 and in the for the first time half of 2001 Westel customers sent more than 30 million per month. Westel Mobile retained its dominance over the market having almost doubled its subscriber base during the course of 2000, from 842,000 to 1.6 million, giving it a market share of 53.1%. By March 2001 the number of subscribers had reached 3.39 million, equivalent to a discernment rate of 33.7%. estel Mobile is owned by Matav (51%) and Deutsche Telekom (49%).Pannon GSMAlthough growth was steady during 2000, Pannon gained petty ground on Westel at the end of March 2001 it claimed a market share of 40.4%, up slightly on the 39.3% it recorded a year earlier. At the same date its subscribers numbered 1.37 million, 38% of whom were signed up to its pre-paid package Pannon Praktikum, which was launched in November 1997. By May 2001 Pannon announced that its customer base had reached 1.5 million. It has offere d WAP services since early March 2000 and claims to have signed up several(prenominal) kelvin users in the first four months. Majority shareholder KPN announced in June 2001 that it was seeking to offload its stake in Pannon as fountainhead as its minority stakes in the Ukraine and Indonesia. Interest in the stakes has been high and at the time of writing KPN confirmed that talks with potential buyers were well under elbow room. Analysts have suggested that Vodafone may show interest in acquiring Pannon to strengthen its position in the country it is not believed that Vodafone will be deterred by the fact that Pannon is likely to be sold in company with VoIP operator Pantel. Pannon is owned by KPN (44.66%), Telenor (25.78%), Sonera (23%) and TDC (6.56%).Vodafone HungaryWhen the VRAM mob launched Hungarys third digital mobile network under the Vodafone name in November 1999 it stated that its aim was to achieve a market share of 10% by the end of 2000. It failed to reach this tar get, signing up 200,000 customers, equivalent to just under 6.5%. Nonetheless, growth has been rapid. By March 2001 Vodafone had signed up 223,000 subscribers, up 374% from the 47,000 it claimed a year earlier. At the beginning of 2001 Vodafone announced that it would invest USD60 million in Hungary to systema skeletale 400 base stations nationwide in addition to the 800 it has already installed. Vodafone has invested hundreds of millions of dollars since the inception of its Hungarian project to fund infrastructure, selling and technological advances. The VRAM consortium consists of Vodafone (50.1%), RWE Telliance (19.9%), Antenna Hungary (20%) and Magyar Posta (10%).Market Share Development in Hungary get Subscriber Development in HungaryMarket AnalysisThis market is characterized by severe price discrimination implemented by all the dynamic firms. All three members of the market have pre paid and post paid packages available to their customers. It is observable that more users opt the pre paid packages in general. This tin be derived from the price discrimination of the competing firms on the market. The following diagram excessively illustrates this tendency. Since the slope of the two lines is determined by the cost per minute it is on the face of it the lower envelope that represents the line according to which buyers should base their preference-based decisions. A customer who does not uses his or her mobile a lot will choose one of the pre paid packages. Controversially nighone who is willing to talk much on his or her mobile will choose the post paid package, which implies to pay more for getting the started and costs less to use. In the lap point of the two lines is the point where the customer is in varied between the two.The market had witnessed unprecedented growth during 2000. At the end of the year it was home to 3.1 million users, this constitutes a 92.5% increase on the previous year end of 1999. This in addition beat the governments forecast of a target of 2.5 million by a considerable margin. Also noteworthy is that mobile sharpness reached an impressive 30.7% in December 2000, up from just 15.9% twelve months earlier. The market is growth indeed. according to analysts, 2002s tendencies were easy to predict. The fast growth continue in the mobile market. However, it seems harder to foresee the development of the market later on. The exclusively fact evident is that in the long run, there will be more mobile terminals in the country than the number of people living in it. Hungarys new telecommunicationmunications act, which is currently being debated in Parliament, is also anticipate to further boost argument in the mobile phone market. With three competing mobile phone operators the Hungarian market is probably the toughest in the entire region.Mobile Penetration Development in HungaryThe second year of liberalized telecommunications in Hungary was marked by a decline in the number of fixed-line subscrib ers, but a persistently growing mobile market. In the first quarter of 2003, the number of mobile subscriptions (including active SIM tables and analogue subscription) pink wine to over 7 million for the first time, says a telecommunication market quarterly report compiled by the National Communications dictum (HIF). A comparison of 2003s summer figures with those from the summer of 2002, shows an increase in mobile phone subscriptions of 22%. The numbers illustrate a major thin in the telecommunications sector of, lets not forget, a country of only 10 million inhabitants. Westel leads the sector with a 47.5% market share, while Pannon GSM ranks second at 36.94%, followed by Vodafone, the smallest player, but one that is quickly growing with a 15.56% share of the market, according to HIF.Prices appear to increasingly level off, and the competition is speeding up. Therefore the mobile companies react faster to each some others steps. Several years ago it withalk mobile operator s almost half a year to counter each others marketing actions, but today it is a matter of days. This type of price war competition was started by Vodafone, Hungarys third mobile phone provider, which entered the market in 1999. Vodafones Vitamax pre-paid cards became an instantaneous hit. Initially Vodafones prices were some 15-20% lower than anything offered on the market, but in the time since Westel and Pannon have lower their prices as well. Pannons new campaign De-Juice was a response to Vodafones younger image, and offers prepaid options along side Pannons already existing Praktikum service. Since March this year, Westel has introduced three new pre-paid Domino packages that offer competitive and unified tariffs on calls made to fixed-line or other mobile networks.There is also a considerable amount of price competition in the post-paid sector. as well as to the post-paid packages, there is a very large array of package allocation possibilities. Of these assortments Westels cheapest offer for subscribers is its Trsalg M package, under which users can call within the network for 36.75 Hungarian Forints per minute in anthesis hours. Under Pannons Horizont package, subscribers can choose between three different categories (Bnusz, Plusz, Extra) that offer economical prices for calls made at different times of the day. In the meantime, Vodafone has come forward with its Rock n Roll Cscs Plusz subscription package, which offers a tariff of 6 Forints per minute for the first 10 minutes of a call made to any network.So competition is maddened among mobile operators for post-paid subscribers and pre-paid card users. Although companies believe they will win customers by advertising the lowest prices, we have ascertained that many pre-paid packages hide additional charges for calls made after prime time hours. Many analysts say that compensate after Hungarys new telecom law takes effect, price competition will continue since there are still significant mili tia in pre-paid card rates.Although mobile operators are extremely careful round detailing their strategies, we believe that telephone equipment prices, along with regular subscribers, will outride the main campaign elements in the future. One aspect of the new telecom law states that from May 1, 2004, customers may keep their mobile numbers even if they switch providers. It seems that this will greatly rearrange the market. It can be expected that pre-paid phone customers will probably have to pay much more for the mobile handsets (as opposed to being relatively cheap, as is the case office now), as it would not be in any companys interest to give expensive, modern phones cheaply to customers who could change providers at any moment.Meanwhile, the value of regular subscribers is expected to grow and those customers who sign a long-run contract will probably be the most important ones. Pannon GSM, for instance, seems to mold more focus on the post-paid customer segment prefera bly of the SIM card market. The current price competition, mostly focused on pre-paid card users, is seen spreading to subscribers who would be able to make cheaper calls as well. Vodafone is also pursue a similar strategy. Telecom Policy Director Pl Marchart says I expect that the new regulation will stimulate market competition even in those markets that show monopolistic signs today. In worldly concern however, the new regulations are being carefully scrutinized and opinions vary. It is questionable whether they will sate the function of creating real market competition.Prices would radically drop if real market competition existed in the market. This question was first raised by Hungarys Competition Authority (GVH). The office made headlines recently with its inquiry into the telecommunications services sector, which resulted in imposed fines for Westel and Pannon. The sector inquiry enabled GVH to achieve a more accurate view of the mobile phone sector. The office found seve ral problems on the mobile market, mainly with the pricing of calls generated from mobile phones to fixed-line networks. GVH accused mobile operators of utilizing restrictive practices in-order to increase mobile use in Hungary. The inquiry assert that there is a mobile phone cartel in Hungary. But of course in the end it accused mobile service providers of lilliputian and did not prove that there were coordinated actions taken on by the mobile firms.GVH could not even prove that call fees to other networks were too high, but only stated that some contracts among mobile providers could distort competition. Westel was fined HUF 210 million and Pannon GSM HUF 150 million by GVH. The fine is not substantial, however, and accounts for a unmixed fraction of mobile operators turnover. Westel and Pannon said they will appeal the GVH decision in Hungarian courts. Vodafone did not have to pay any fines. The mobile companies concur that fees for calls to other mobile service providers wou ld cost less than calling fixed-line operators.In Summary then, we believe it is safe to say that continued competition and casual price-wars will continue to surface among the three mobile conglomerates in Hungary. We have just recently perused in the latest issue of the Budapest time that the new telecoms legislation has just been officially approved in Parliament. The new telecom act will come into force January 1, 2004 for fixed-lines and May 1, 2004 for mobile networks, just in time for the EU entry. We are yet to see what real effects this law will have on market competition, and if predatory and limit pricing attempts will be detected and penalized by the GVH. Also of note for future developments is Hungarys ensuing EU absorption.Although it is expected that new fixed-line operators will enter the Hungarian market after EU integration, in the mobile market, the situation is quite different. Given the considerable number of active mobile phone users in the Hungarian populati on, it seems inconceivable that a potential new entrant firm could operate efficiently conterminous to the incumbents. They would need a lot of resources and a good financial background, since legislate on the investment would probably take a good number of years. The fact that the number of mobile providers is not bound to increase in the future is one issue that all three firms seem to agree on. However, we believe that eventual new entrants will or should make their bearing on the market, since this would further promote competition which is an obvious goal of the Hungarian Competition Office (GVH). What we, consumers can do is to hope that at some point in time prices and minimum average costs will tend to meet, setting an end to the presence of dead weight loss. This way welfare as well as consumer surplus will be maximized on the Hungarian mobile market.BibliographySources Consulted and ReferencedHungarian Competition Authority (GVH) official website www.gvh.huHungarian Nat ional Communications Authority (HIF) official website www.hif.huPannon GSM Mobile Service Provider Corporation official website www.pannongsm.huThe Budapest Times Newspaper. sequel Nov 28. Dec 4. 2004 www.budapesttimes.huVodafone Mobile Service Provider Corporation official website www.vodafone.huWestel Mobile Service Provider Corporation official website www.westel.hu