Dvorjančanský: Croatian telecom market is highly unbalanced

According to Vipnet’s CEO Jiří Dvorjančanský, Croatian market is highly unbalanced, where one operator generates more than 75% of the profit, and this is a difficult environment for alternative operators. In his opinion consolidation on the market is inevitable especially in the situation where wholesale pricing does not leave enough space for alternative operators.

Telecom operators are trying to find new revenue streams in broadband, content and ICT segments. What is now the position of Vipnet?

Since the beginning, Vipnet was the leading operator on the market regarding investments into new technologies. Last two years Vipnet has put a strong emphasis on the core business. Recently, we covered more than 400 thousand households with our own infrastructure, and we are working on the implementation of the DOCSIS 3.1 standard so the customers will be able to enjoy speeds of up to 1 Gbit/s in the fixed segment. In the mobile segment, we have started implementation of speeds up to 300 Mbit/s in four major cities. By doing so, Vipnet is the most prepared operator to meet the demands of not only the Digital Agenda 2020 but also of Gigabit society which goals are expected to be achieved in 2025. Besides the core business, we are putting additional focus on the development of ICT services and will continue to follow global ICT trends and by focusing on the customer through the offer of quality services that provide the best customer experience.

We are working on the so-called traditional ICT offer, for example, large system integration project that includes communication and data infrastructure in one of the leading food companies in Croatia. There is a number of projects that use the synergy of the telco and IT world, like commercial Wi-Fi projects, hotel television system or mobile payment solutions. Some of the most significant contracts are concerning the services of our data center that has the highest growth in the entire Vip ICT portfolio. This shows that we choose the right strategy by investing in the data center that has superior reliability and security.

Vipnet is considered as the most obvious buyer of Metronet. Can you comment on this and also the consolidation of Croatian telecom market (Optima-H1)?

The Croatian market is highly unbalanced, where one operator generates more than 75% of the profit; this is a very difficult environment for alternative operators. In the situation where wholesale pricing does not leave enough space for alternative operators, and they are facing squeeze out, consolidation is inevitable. Regardless, Vipnet is continually investing into both mobile and fixed segment and is dedicated to providing customers with competitive technologies. We are currently operator with the biggest and the fastest next generation fixed network in Croatia. For every euro the company makes, 90 percent is reinvested. Vipnet is also constantly monitoring the situation on the market, and we have already proven that we are seizing the opportunities on the market when we see them, but we can not comment speculations regarding Metronet.

The company is going through a transformation. What are the key transformation factors?

We are developing new competencies inside the company in order to perform successful digitalization of our business, not only on all customer touch points but as well through the internal implementation of digital platforms for better efficiency. We are making a stronger entrance in ICT segment and intensifying our cooperation with startups. We already started cooperation with HUB385, and this is just the beginning. Vipnet will also continue with a strong focus on the customers. We are already the leading operator when it comes to customer satisfaction. Our main goal in that regard is to provide customers with services they really require by implementing latest technologies.

EU and EC have new plans for broadband and 5G networks. What is needed for these objectives to achieve?

Significant investments and strong dark fiber aggregation infrastructure that is less dependent on current leased line offer of the incumbent under unfavorable conditions. New dark fiber infrastructure will ensure sufficient capacities of the highest level of quality for NGA operators.

By introducing 5G, we will witness multiple traffic increase where both mobile and fixed alternative would be under additional pressure because of the lease dependence. Therefore, we welcome the Government`s decision regarding new National Strategy for Broadband Development in the period 2016th-2020th, and two additional interconnected national programs that enable the construction of fast and ultrafast broadband access networks in areas where there is no commercial interest with co-financing from EU funds and new dark fiber aggregation network. These programs enable more competitive offers for the end customers and higher broadband penetration outside the cities.

According to new HAKOM results for Croatian telecom market, mobile telephony and broadband are still generating the growth. How to sustain this trend?

Telco is CAPEX very intensive industry so we will need to continue with strong investments in next generation networks. It is paramount that these investments are followed by stable regulatory framework and reduction of taxation that is slowing down investments. The other important thing is already mentioned network development where we face incumbent’s unfavorable offers. In the current situation, the incumbent would dictate competitiveness of two other mobile players on the market. That is why we need to develop and increase network competition because it will bring new dynamics to the market. Without competitiveness in this segment, there is a danger of seeing the same trends that are currently present in the fixed business and possible consolidation of the mobile market.

How can telecom operators fight with OTT players on the market - on one side the big investments in the network and on the other side big demand for data?

A key trend in the telecom industry is surely the exponential growth of demand for data traffic. This is, of course, a great opportunity for operators and includes substantial investments into new generation mobile and fixed networks. This is supported by the fact that voice calls take up less than 5 percent of our network capacity. Alongside operators, OTTs are also driving the demand for data traffic and Vipnet will play a key role in connecting customers. Therefore, we have decided to cooperate with OTT and provide our customer with a better service. One of the great examples is our cooperation with Viber.