Market overview

T-HT Group successfully maintained its leading position in the Croatian telecommunications market in 2010, despite strong competition and a serious and prolonged downturn in the Croatian economy.

Notable events in 2010 include the following:

• On 31 December 2009, T-Mobile was officially merged into HT d.d.
• In March 2010, as part of its strategy to become a significant provider of information and communications technology and services, T-HT Group signed a Share Sale and Transfer Agreement to acquire the entire share capital of the leading Croatian IT systems integrator - Combis d.o.o. The transaction was successfully completed in May 2010.
• In May 2010, T-HT distributed HRK 2.7 billion in dividends to its shareholders (HRK 34.05 per share).
• Exclusive offers on the new Apple iPhone 4 and Dell Streak tablet from September 2010 marking a new trend in mobile computing and an extenstion of broadband offerings.
• In September 2010, as part of its expansion strategy, T-HT applied for pre qualification in the privatisation of Post and Telecommunications of Kosovo J.S.C. (PTK).
• Also in September, the Group reached 600,000 broadband customers.
• Successful launch of new prepaid brand bonbon in October, aimed at young urban professionals.
• IPTV service achieved the important milestone of 270,000 customers in Q3 2010, strongly confirming its leading position on the growing Croatian PayTV market. By the end of 2010, this number increased to more than 297 thousand customers
• As of December MAXtv is also broadcasted via satellite, making it available to any home with a satellite receiver.

Market trends

During 2010 the Croatian telecommunications market recorded growth in broadband, both fixed and mobile, and in IPTV. The economic downturn hit phone usage, with mobile calls (measured by minutes of use) decreasing at a higher rate than fixed telephony. The decline in the mobile market continued throughout 2010, burdened by market saturation and the effects of the recession on purchasing power, as well as the mobile tax imposed on operators as an emergency measure against the recession. However, mobile broadband is becoming a growth story thanks to an increasing number of smartphones and other mobile broadband devices such as tablet computers.

Macroeconomic environment
Croatian economy continues in recession

According to the Croatian Central Bureau of Statistics, the recession continued to affect the economy well into 2010, with GDP falling 1.6% in the first nine months of the year. Only in Q3 did GDP finally achieve modest growth of 0.2%, supported by tourism and a slight increase in personal consumption following a rise in seasonal employment and the abolition in July of the crisis tax on personal earnings. Unemployment in Croatia remained high during 2010 with the registered unemployment rate of 18.7% in December 2010, compared to 16.7% for the same period in 2009. The highest unemployment rate for five years, it had a strongly negative impact on personal consumption, which represents the major part of the country’s GDP. Retail consumption fell by 5.3% in the first six months of 2010, while the average monthly net earning showed a real decrease of 0.5% in the first eleven months of 2010, compared with the same period in 2009. Inflation, during 2010, increased by 1.1p.p. beyond the national annual average of 2010. As for the impact on business, illiquidity rose with outstanding unpaid obligations increasing by 37% in the first three quarters of 2010 to EUR 4.4 billion. In the same period, the number of insolvent companies rose by 30% to 31,000.

Fixed-line market
T-HT maintained leadership against expected market decline

Fixed telephony remains highly competitive in Croatia, with nine operators, including T-HT Group, active but no new entrants in 2010. T-HT successfully maintained its leading position with an estimated market share of around 70% (source: Croatian National Regulatory Agency, September 2010). This success reflects the Group’s continuing dedication to high-quality services and improved marketing with offers tailored to suit the needs of specific customer segments.  

According to the Croatian Central Bureau of Statistics, the number of fixed-line minutes of use (MOU) decreased by 0.8% during the first nine months of 2010. There was no major change in fixed-line penetration, which is around 41.8% of the population, according to the National Regulatory Agency.  

Mobile telecommunications
T-HT leads saturated market, mobile internet the new trend

T-HT, through its T-Mobile brand, remained the leader in a saturated market, with mobile penetration of an estimated 143.9% served by three operators since 2005. According to the Croatian National Regulatory Agency, the Company’s share of total mobile customers in Q3 2010 is estimated at around 45%. According to the Croatian Central Bureau of Statistics, total Croatian mobile market minutes of use (MOU) decreased by 1.6% during the first nine months of 2010. Demand for mobile Internet grew steadily with all three mobile operators promoting their mobile broadband offers. In 2010 the two leading mobile operators both posted lower revenues.

Internet
T-HT dominates the growing broadband market; MAXtv one of Europe’s most successful IPTV launches

T-HT remained the largest provider of broadband services in Croatia, continuing to expand the roll out of its high-speed MAXadsl offering and augmenting it with premium services such as MAXtv – the Group’s IPTV service. During 2010, T-HT continued to improve its IPTV service by adding new channels and launching a Sports package featuring the best international sport channels and exclusive sports content.

At the end of 2010 the Group had 629,228 ADSL subscribers, up from 554,995 in 2009. The number of IPTV customers at the end of 2010 was 297,496, representing 47.3% of T-HT's total ADSL customer base.

Despite the strong increase in subscriber numbers, Croatia’s broadband market remains a significant growth opportunity for T-HT, with just 43% of Croatian households connected via broadband compared to an average of more than 55% in Western Europe.

Data
Market continuing migration to IP-based services; quality of service secures T-HT’s leading position

 

T-HT maintained its leadership of a market that is migrating from traditional unmanaged data services to more cost-effective, IP-based services. Although the data market is relatively small, representing less than 2% of total telecom market revenues, it represents an important service for business customers.

The Group’s main data service competitors continued to develop their own networks targeting the corporate and government sectors.

Wholesale
Domestic and international competition; T-HT the largest player with the most extensive network coverage

Both, ULL (unbundled local loop) and bitstream offers are available in the Croatian market, enabling competitors to offer their own broadband products to consumers, even if they do not operate the local loop. As market liberalization continued, the number of ULL customers increased from 123,054 in 2009 to 132,821 at the end of 2010.