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New European Mobile Services Opportunity

Even as markets approach saturation and prices continue to fall, spending on mobile services in Central and Eastern Europe expanded last year and will continue to do so for the foreseeable future.

According to an IDC study of 11 markets in the region, spending rose 13.5 percent in 2005 to $15.12 billion, and should rise by 9.5 percent this year. Subscriptions rose a substantial 15.7 percent across the region, bringing total penetration to 78 percent, with three more countries passing the 100 percent mark, bringing the total to four (Czech Republic, Estonia, Lithuania, and Slovenia).

"The CEE mobile markets are growing but they are also going through turbulent times, with high saturation fueling rivalries," said Kresimir Alic, research analyst, Communications, IDC CEMA. "Operators have redoubled their efforts to encourage prepaid customers to take on postpaid contracts, ramping up data and 3G offerings to create new revenue streams. The nature of the technology has become less important than what it can do, and high-speed wireless Internet connections are being rolled out to both attract customers and raise portfolio profiles."

Poland led the region in total subscriptions in 2005, with the country accounting for more than double the number found in second-ranked Romania. The saturated Czech Republic ranked third. Together, these three countries represented over 61 percent of activated mobile subscriptions. Poland also led in customer spending last year, followed by the Czech Republic and Hungary, and these three countries together constituted 58.6 percent of regional market value.

When looking at countries by average revenue per user (ARPU), the rankings look substantially different. In 2005, Latvians led the pack, generating more than 25 percent more revenue per person than Hungarians, who were placed second, and more than a third as much as Estonians, who ranked third. Bulgaria, Poland, and Romania spent the least proportionally. According to IDC, ARPU is falling as the number of low-spending consumers purchasing mobiles is rising.

"Even in the most saturated markets, like Lithuania, which topped the 2005 charts at 129 percent, the future is relatively bright," said Alic. "New technologies and the surging popularity of portable PCs and other wireless devices mean that markets still have room to grow and revenue will continue to rise for the foreseeable future. Still, operators will have to fight for their share through aggressive marketing and the rollout of viable services."

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