LATEST TELECOM DEVELOPMENTS IN AUSTRIA

UNCLAS VIENNA 001996 SIPDIS SIPDIS DEPARTMENT FOR EB/CIP (TIMONTHY FINTON) AND EUR/AGS USDOC FOR NTIA (CHRISTINA SPECK) AND OTT (JOSEPH BURTON) E.O. 12958: N/A TAGS: ECON ECPS ETRD USTR AU SUBJECT: LATEST TELECOM DEVELOPMENTS IN AUSTRIA Summary -------------- ¶1. After strong growth over the past 10 years, total telecom sales in Austria declined slightly in 2006 due to downward pressure on prices in the mobile phone sector and a significant drop in demand in the fixed-wire phone segment. Austrian mobile phone operators will implement the EU Roaming Regulation at the latest allowable date. A Hungarian financial investor and the France Telecom subsidiary Orange have acquired control of "One," Austria's third largest mobile phone provider. A recent poll indicates that Austrians are mobile phone addicts, with 89% always carrying their mobiles. With a broadband penetration rate of 15.8%, Austria fell to 11th place in the EU in 2006, down from 5th place in 2003. Telekom Austria will upgrade its satellite infrastructure to target the African market in cooperation with its partner, the satellite operator Loral Skynet. End Summary. Telecom Sales Declined in 2006 -------------- ¶2. According to the Austrian telecom regulator RTR, telecom sales declined in 2006 for the first time following 10 years of strong growth propelled by market liberalization. Total telecom sales declined 0.5% from 2005 levels to Euro 4.75 billion in 2006. Downward pressure on prices, a consolidation in the mobile phone sector, and a significant drop in the fixed-wire telephony segment contributed to the overall decline. RTR Managing Director Georg Serentschy noted that the fixed-wire segment suffers from stagnating prices and drastically shrinking call minutes demand. The number of fixed-wire phone lines shrank by 92,000 to 2.9 million in 2006, while the number of mobiles rose by 600,000 to almost 9 million in a population of 8.3 million. Dragging Out Implementation of EU Roaming Regulation -------------- -------------- ¶3. The EU's new Roaming Regulation requires mobile phone operators to offer the new Eurotariff by July 30, with an effective date of August 30 for customers of existing roaming packages. For those without a package, the effective date is September 30. While T-Mobile announced it would implement lower roaming fees in Germany as of July 1, the Austrian T-Mobile subsidiary stated that, for technical reasons, introduction of the Eurotariff would take approximately three months, i.e., after the summer holiday season. Austria's market leader, Telekom Austria subsidiary Mobilkom, reportedly also plans to fully utilize the September 30 deadline, as do the third and fourth largest operators, "One" and "3." Mobile Phone Provider "One" Sold -------------- ¶4. On June 20, the Hungarian financial investor Mid Europa Partners, acquired a 65% share and the French-Telecom subsidiary a 35% share in "One." With an offer of Euro 1.4 billion, the Hungarian-French consortium outbid the Dutch competitor KPN. Previous attempts to sell "One" had faltered due to a high asking price. The new owners announced they would soon rebrand "One" into Orange. ¶5. "One" holds the number three position in the Austrian mobile phone market with some 2 million customers. The market leader, Telekom Austria subsidiary Mobilkom, boasts 3.6 million customers, followed by the German T-Mobile subsidiary with 3.4 million customers. Hutchinson "3" Austria, a subsidiary of China's Hutchinson Whampoa holds the number four spot with 450,000 customers. "One" attracted 12% additional subscribers in 2006 with cheap tariffs, but at the expense of reduced profitability. The Austrian mobile phone market is characterized by cut-throat competition with minimal growth potential, as mobile phone penetration has reached 110%. Study Shows Austrians Are Mobile Addicts -------------- ¶6. According to a study by the GfK market research institute, 89% of the Austrians always carry their mobile when leaving home - more than those carrying ATM cards or drivers licenses. Availability and security rank as primary reasons for carrying mobiles at all times. One-third of those polled need a mobile for business reasons. Since 2004, the number of phone calls per mobile has remained relatively stable at 11 calls per day. Broadband Expansion - Austria Falls Behind -------------- ¶7. According to Berthold Thoma, President of the Alternative Telekom Network Operators, Austria is falling behind in broadband penetration. Thoma pointed to the EU's 2006 Electronic Communications Regulations and Market Report, which ranks Austria with a broadband penetration rate of 15.8%, number 11 in the EU, down from number 5 in the EU in 2003. The broadband penetration rate of the EU-25 is 15.7%. The number 1 EU country, the Netherlands, has a broadband penetration of 29.8%, while in the U.S., penetration is 19.2%. Telekom Austria - Satellite Infrastructure for Africa -------------- -------------- ¶8. Over the last several years, Telekom Austria has successfully established itself in the African market with satellite communication, as well as increasing business by connecting International Service Providers (ISPs) to international backbones. With a view towards further expansion in the African market, Telekom Austria will upgrade the satellite capacity of its teleport Aflenz by installing a new large antenna with a 16-meter diameter. The new antenna will be available in early 2008 as an uplink station for the new "Telstar 11N" satellite, which the satellite operator Loral Skynet, Telekom's partner, will launch in 2008. "Telstar 11N" reportedly represents a quantum leap to improve Africa's communications connection. The new antenna and the cooperation with Loral Skynet will enable Telekom Austria to benefit from the enormous Internet growth in Africa. OLESEN