PRAGUE, Czech Republic-Cesky Mobil, the Czech Republic’s third mobile telephone operator, is seeking to differentiate itself from its competition by offering low start-up costs and emphasizing ease of use.
The formula has paid quick dividends. In its first four operational months, it signed up more customers than expected. But customer loyalty could be problematic, and the company will have to work hard to build average revenue per user (ARPU), industry analysts said.
The country’s growth in mobile users, meantime, is impressive. Czech mobile customer numbers will increase more than 100 percent in 2000, predicted Ondrej Datka, an analyst with Prague-based investment bank Patria Finance. Datka predicts 3.9 million Czech wireless users by year’s end, or 38 percent of the population. In December 1999, mobile-user penetration was 18.9 percent of the population, with 1.9 million users, he said.
Datka’s estimate for December 2001 is 5.28 million customers, pushing market wireless penetration past the 50-percent mark. The Czech Republic’s population totaled nearly 10.3 million in June, according to the Czech Statistical Office.
Datka attributed the growth to Cesky Mobil’s entrance into the market, the country’s improving economic situation and increased consumer confidence, and the fact that mobile phones are now viewed as a “fashion phenomenon” instead of a mere technical device.
Third market entrant
Cesky Mobil entered the Czech mobile market in October 1999, when the Czech government announced the Montreal-based Telesystem International Wireless (TIW) bid for the country’s third mobile telephone license was successful.
Cesky Mobil is 85.5-percent owned by TIW, which also owns a mobile operator in Romania. TIW expects to invest as much as US$800 million in Cesky Mobil, said Mark Boutet, TIW spokesman based in Montreal.
Cesky Mobil joins Eurotel Praha and RadioMobil in offering mobile telephone services to the Czech market.
Cesky Mobil began commercial operations 1 March. At the end of September, the company had signed up 165,000 subscribers, capturing about 5-percent market share, Cesky Mobil spokesman Igor Prerovsky said. In the second quarter, the company’s end-of-year target was 200,000 customers, and Prerovsky said sales are exceeding initial expectations.
The company’s wireless network, which is being built by Ericsson and Siemens, provided coverage for more than 90 percent of the Czech Republic’s population and about 99 percent of its major roadways at the end of the third quarter, Prerovsky said. Cesky Mobil wants to achieve “coverage parity” with its competitors by the end of 2000, he said.
The company, which uses the brand name Oskar, is seeking customers “who never even thought of mobile telephony” in the past, Prerovsky said.
Indeed, the firm has a sales van moving through the less-populated areas of the country not covered by one of the company’s 20 retail stores. Purchases can also be made over the Internet, with Cesky Mobil delivering a handset to a buyer’s door.
This emphasis on consumers, rather than business clients, is reflected in its tariffs. Oskar’s cheapest calling plan, called I Hear You, costs about US$0.25 per month, requires no activation fee and includes 40 free minutes of airtime. Of Oskar’s four postpaid calling plans, only one requires a client to commit to a contract, carrying a four-year minimum obligation. In exchange for the commitment, the customer receives, for about US$15 per month, 300 minutes of free calling.
While this aggressive pricing may attract consumers, it too has its drawbacks, said Scott Moore, senior analyst at IDC Central Europe, based in Budapest, Hungary. First, though Oskar may collect many new customers, the ARPU will be relatively low compared with its competitors, he said.
Second, making it easy for customers to sign up by requiring no contractual commitment also means customers can drop the service just as easily, said Moore, who monitors Central European mobile telephony.
John Ketchum, a TIW communications specialist currently assigned to Cesky Mobil in this capital city, concedes his firm is third out of three when the companies are ranked by ARPU, a benchmark measurement in the mobile-phone industry. He added, though, Oskar will attract more business customers-who traditionally spend more money on mobile services-in coming months, and that once customers become comfortable with their new telephone services, they will spend more money using them.
While Cesky Mobil is focusing on the consumer market in 2000, new products aimed at business users will begin to be rolled out in the first quarter of 2001, Ketchum said.
Eurotel is expected to lead market share with 48.5 percent at the end of 2000 with about 1.9 million accounts, Datka said. RadioMobil will follow with 44 percent, and Cesky Mobil will possess 7.5 percent, he said.
Market trends
Each Czech operator tries to project a different image of itself to consumers. Eurotel emphasizes what it describes as its high-quality service, such as numerous international roaming partners, sound clarity and data services. RadioMobil emphasizes added-value services, such as live translation and conference-call arrangement, and tries to present a trendy and modern look, featuring young people and bright colors in its advertising. Newcomer Cesky Mobil tries to be, as its motto says, for “everybody, everyday.”
Purchasing trends have the companies chasing many of the same customers who are seeking prepaid plans. Indeed, more than 75 percent of new users select prepaid products because of low-entry cost and no need to commit to long-term service, Datka said.
Value-added services are being introduced as well. Oskar plans to join its competitors in offering WAP services by the end of October, Prerovsky said. Wireless banking is already available in the Czech Republic, and non-WAP users can buy services that send news and information as text messages to their handsets as well.
The growth in the mobile telephony segment is in stark contrast to the country’s prior telephone service. In 1990, a person could wait up to six years to receive a poor-quality private telephone line, Ketchum said. Now a working phone can be had in a few days. Datka noted far more mobile telephones are added each month compared with the number of added net fixed lines-newly installed lines minus canceled lines. Indeed, many customers have simply leapfrogged over fixed lines, moving from no telephone to a mobile one.
Eurotel is 51-percent owned by the country’s monopoly fixed-line operator Cesky Telecom and 49-percent owned by a consortium led by AT&T Wireless and Verizon Communications.
RadioMobil is 51-percent owned by Ceske Radiokomunikace. The remaining 49 percent is owned by CMobil, a holding company 84.55-percent owned by Germany’s Deutsche Telekom. Deutsche Telekom announced in March it will exercise an option to buy an additional 11.8 percent of CMobil for US$765 million.
