Romanian MNOs retain control over infrastructure

The Romanian telecom and broadband market is one of the most advanced in Europe, although SIM penetration of 141% (GSMA Intelligence, Q4 2015) among a population of 19.4mn is somewhat inflated by multi-SIMing. In recent years network investment has meant that 3G is available widely, while LTE has a growing footprint and is expected to be available countrywide in 2016. Market competition has also rendered services increasingly affordable for consumers. It is a positive picture for MNOs and consumers, but not necessarily tower companies, who have struggled historically to gain entry to the market. Drawing on insights gleaned from the Romania roundtable at the TowerXchange Meetup Europe 2016, let’s look at why tower companies have been locked out of the country, and whether there is any chance that they may get admitted in the near future.

The Romanian mobile telephony market includes four operators – Orange, Vodafone, Telekom Romania (owned by Deutsche Telekom) and RCS&RDS. At the end of 2014, Orange Romania had 10.5mn mobile clients, while Vodafone Romania had 8.6mn users, followed by Telekom Romania with 5.9mn mobile subscribers. RCS&RDS does not record data on its clients, but according to an estimate published in the local business daily Ziarul Financiar, the company had just over a million mobile customers in 2014. Local sources suggest RCS&RDS may IPO in H2 2016.

Although Romania is the tenth poorest country in Europe, it has taken great strides to improve its digital infrastructure. In January 2014, the country had 3.79mn fixed broadband lines, representing the 9th highest number of lines amongst European Union (EU) countries. During the same year, ultra fast broadband (at least 100 Mbps) penetration reached 4.%, well above the EU average of 1.6%. Launched in 2015, Lycamobile was the first MVNO in Romania.

Romania’s investment in broadband is expected to spearhead more growth in the telecoms sector. Driven by the introduction of 4G, the market is predicted to grow at a CAGR of 2.7% between now and 2018, reaching RON 16.4bn (~€3.66bn) by 2018. The top growth segments are expected to be fixed and mobile data, boosted by multiplay service uptake.

In 2013, Orange Romania and Vodafone Romania set up a joint venture called Ovidiu Telecommunications to manage the two companies’ shared infrastructure. The deal, which covers active and passive equipment, was expected to generate savings of about €10mn over 16 years. In April 2014, the two companies announced that they had rebranded the company as Netgrid Telecom.

Orange Romania launched LTE in 2012 and claimed to have 70% population coverage in Q4 2015. At that time Telekom’s coverage was around 35%. Orange has since signed a wholesale network sharing agreement with Telekom, giving the latter national roaming on Orange’s 4G network.

Passed in 2012 by ANCOM, the National Authority for Management and Regulation in Communications of Romania, the Infrastructure Law (no. 154/2012) defines the regulator’s stance on infrastructure sharing (see http://www.intt.tn/upload/files/Roumanie.pdf). The Infrastructure Law also:

- States that if documentation is correctly submitted and access conditions met, sites can be built on public property within 30 days of request for access being received

- Provides a standard contract for access on private property

The Infrastructure Law also appears to more or less mandate infrastructure sharing of sites on public property, while setting the minimum structural capacity of sites.

In 2015 Romania’s Ministry for Information Society approved a National Plan for Next Generation Network Infrastructure Development to promote the widespread availability of fast broadband Internet. Promotion of access to passive infrastructure and improving transparency and coordination of civil works are two of five pillars of the plan.

Initiated in 2014, ANCOM is finalising a national inventory of electronic communications networks, in part to ensure a common database is used for network sharing, prior to the publication of which it is not possible at present to ascertain how many towers are present in Romania. All of Romania’s towers are currently owned by the MNOs, and there are no independent tower companies operating in the country.

The prospects for independent tower companies appear to be poor. While Romania is one of the poorest countries in Europe, its citizens are extremely enthusiastic about technology. Network coverage is excellent both for voice and Internet, and the range of handsets and smartphones available is extensive. Romania is the most competitive and advanced telecoms market in Eastern Europe. With Average Revenue Per User (ARPU) of €20, operators are under no pressure to divest any of their towers. They can comfortably re-invest a portion of their earnings in maintaining and improving their infrastructure. It also makes a difference that the majority of MNOs operating in the country are foreign-owned multinational businesses with deep pockets.

The Romanian mobile telecoms market is one of the most dynamic in Eastern Europe. Over the coming years, the market is expected to consolidate, with operators providing a number of integrated services covering data, broadband, Internet, TV and video. Competition is heating up in the market and operators are actively looking for new commercial opportunities – for example, RCS&RDS recently announced plans to enter the energy market and become a power supplier.

However, at present, there do not appear to be any prospects for tower companies to enter the Romanian market. There is currently no market rationale for the MNOs to divest their towers to a third party. Unless something dramatic happens in the sector, tower companies are better off seeking opportunities in other European markets.