United Group To Face Stiff Competition In Croatia
Fitch Solutions / Telecoms, Media, Technology / Croatia / Mon 03 Jun, 2019
Tele2 has sold its Croatian operations to United Group.
We believe United Group will leverage Tele2’s mobile assets to create a larger converged player.
The Balkans remain a hotspot for consolidation.
As we have previously highlighted, consolidation remains one of the major trend in the European telecoms market (see ‘Telecoms Consolidation View Playing Out In Europe’, January 23 2019). The Balkans have been particularly affected by this wave of consolidation, with regional players expanding their presence across several countries, as larger telecoms companies continue to exit Central and Eastern European markets to focus on their core Western and Nordic operations.
By acquiring Tele2’s assets in Croatia for EUR220mn, United Group is among the regional players currently expanding their footprint in the Balkans. The company already controls Serbia Broadband (SBB) and Telemach, being present in Serbia, Bosnia and Herzegovina, Montenegro and Slovenia. By becoming the third operator in Croatia, it will continue to challenge Deutsche Telekom and A1 Telekom’s operations across the region.
United Group will enter a very competitive market. T-Hrvatski Telekom (T-HT) and A1 Croatia already offer mobile and fixed services, with the former controlling around 50% and 60% of both segments, respectively. Furthermore, since 2014, T-HT has been a shareholder of wireline operator Optima Telekom following a pre-bankruptcy settlement process and will retain the shares until 2021. This means that T-HT not only is the market leader, but has a degree of control also over Optima Telekom, leaving A1 Croatia to be the only wireline player to effectively challenge T-HT’s dominance.
With fixed telephony subscriptions declining and mobile penetration at almost 103%, operators are increasingly focusing on convergence to sustain growth. According to regulator data, at the end of 2018 cable TV and IPTV registered an increase in the number of subscribers, reaching 178,200 and 424,400 respectively and signalling potential further expansion. Meanwhile, different type of bundles reported different trends: dual-play subscriptions fluctuated but remained the most popular package with around 500,000 subscribers, while triple-play services registered a decline. Quad-play offerings proved to be the most successful, growing by 53% year-on-year to 210,000 subscriptions. We expect T-HT and A1 to continue strengthening their pay-TV offerings both in terms of reach and content to attract a wider subscriber base towards converged services. T-HT is already driving this trend, having bought pay-TV provider Evo TV in March 2019.
Convergence To Drive Growth
By acquiring Tele2’s operations, United Group will gain around 900,000 mobile subscribers, but no foothold in the wireline segment, being therefore unable to offer converged services. However, some of the company’s TV channels are already available in Croatia and we believe the operator will leverage its regional and technical expertise to build up wireline and pay-TV services to broaden its offering in the country. Private equity group BC Partners, United Group’s new majority owner, will provide the financial means to support the investment. In addition, investments in fixed broadband networks will be warmly welcomed by the Croatian government, which has been keen to support the improvement of broadband services in the country together with the European Commission.
Zadnja izmjena: Iknow