Bulgaria's telecommunications industry has reached a crucial point, as high penetration rates have lead to increasing competition for customers. Both fixed-line and mobile phone operators are investing in new technology to offer their clients the latest products. Each of the country's three mobile operators is developing a strategy for long-term profitability, while reforms mean the leading fixed-line operator will soon be able to offer lower prices on calls to mobiles.
Bulgaria's main fixed-line operator, Bulgarian Telecommunications Company (BTC), announced this month that its preliminary consolidated net profit reached $86.5m, an increase of 15.07% from last year. Costs had fallen by 10%, the firm announced.
The announcement came as Icelandic firm Novator, which has a 65% stake in BTC, is reported to be considering selling its share. The remaining 35% is traded on the Bulgarian Stock Exchange (BSE), and the stock's recent strong performance means it will be included next week in the exchange's blue-chip SOFIX index of the 16 strongest stocks.
This is a strong performance for the company, given the downward trend in the fixed-line market as competition from mobile operators bites into the fixed-line sector. BTC's revenue from fixed-line operations declined 2.7% last year to $666.29m, while revenue from the firm's mobile wing Vivatel, which was launched in November 2005, increased three and a half times to $63.54m.
Last year, BTC invested $231.51m in its systems, the bulk of which was spent on the digitalisation of the fixed-line network. BTC's CEO Martin Staub said he was "delighted" by the "continued success" of the firm. He announced at the start of February that the price of calls from fixed to mobile phones would be lowered once Bulgaria adopts the Electronic Communications Act, which will harmonise Bulgaria's legislation with the EU. Currently, the price for such calls are between 52% and 92% higher in Bulgaria than in Western Europe, according to Staub.
Vivatel has ambitious expansion plans, with a target of 13% market share by the end of 2007, almost double its 6.7% at the end of 2006. This will be partly achieved by increasing coverage. The company hopes to cover 95% to 97% of the Bulgarian population and 85% of the country's territory by the start of 2008. Vivatel had 700,000 subscribers at the end of last year, up from 215,000 at the end of 2005.
In the relatively fickle Bulgarian market, customers change subscription relatively regularly, and Vivatel are basing their strategy on winning over customers from other companies. The firm believes it will benefit from the mobile number portability rule introduced at the beginning of the year, which allows subscribers to change networks while keeping their phone number.
The other operators on the Bulgarian market are Mobiltel, a unit of Telekom Austria and Globul. Mobiltel, the Bulgarian unit of Greek wireless phone operator Cosmote has more than four million subscribers while Globul had three million customers in November last year.
Globul is aiming to optimise its profits by focussing on developing its 3G services rather than pursuing greater market share. The firm has invested more than $749m over the past five years in its distribution, network, customer care and infrastructure development.
One of the central pillars of the 3G development will be offering subscribers television service on their mobile telephones. While usage of 3G in Bulgaria remains low, operators believe it will prove lucrative, given the higher profit margins data services generate over voice. Globul CEO Thanasis Katsiroubas told the local press that, "soon attracting new subscribers will not be our major task...in the future, we will put a special emphasis on developing and offering fresh and innovative value-added services."
Mobiltel announced they are introducing their own high-technology services. Mobiltel CEO Josef Vinatzer said at the 3GSM conference in Barcelona this week that the operator would launch data Virtual Private Network (VPN) and internet via WiMax wireless technology. By the middle of this year, Mobiltel is expected to offer Wi-VPN as part of a package that will include voice services and internet access - an alternative to ADSL internet service.