CEE Telcos Continue to Seek Revenue Outside Their Core Business Area

CEE Telcos Continue to Seek Revenue Outside Their Core Business Area
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According to new IDC data, due to the improved economic environment in Central and Eastern Europe (CEE), revenues that telecommunications operators in the region generate from sales of telecom services have started to grow again. In spite of this, telcos are expected to continue searching for new sources of revenue outside their core business area.

Presently, almost all CEE incumbent telcos provide IT services such as datacenter services, cloud services, and security solutions. Incumbent operators in Croatia, Hungary, and Poland further act as distributors of gas and electricity. And the variety of non-telecom services offered by telecom operators continues to grow, as telcos add development of their own TV content, management of electric vehicle charging stations, and more to their service portfolios. Consequently, their non-core-business revenues will continue to increase throughout the 2017-2021 forecast period.

The latest research by International Data Corporation (IDC) indicated that the combined revenues from all non-telecommunications services (including equipment sales) constituted 15.0% of the total revenues reported by 11 surveyed CEE incumbent operators in 2016. During the last two years, however, IDC has noted an important change: This strategy is no longer a one-way street.

"Telcos are expanding operations outside their core business area and making additional investments into activities they find promising, but they are also pulling out of business endeavors that have not proved lucrative,“ says Kresimir Alic, senior program manager at IDC. “The ability to dynamically pursue opportunities in any market often represents the difference between successful and unsuccessful telco operators.“

As in 2017, the growth of non-core business revenues among CEE telcos will again rise in 2018, mainly due to significant growth in the three major sections: energy services, ICT services, and terminal equipment sales. The retail electronics segment, on the other hand, will post a large decline as a result of Telekom Romania's decision to close its web mall. Growth rates will remain healthy in the medium-term, driven by stable demand for terminal equipment (smartphones) and a growing number of business endeavors by telcos in various non-telecom industries.