Market climate

Despite continuing buoyant conditions in the Polish economy as a whole, Poland’s telecoms market saw markedly slower growth in 2007. According to our estimates it grew by only 1.4% in value terms as compared to 5.2% in the previous year. This slowdown was primarily caused by a series of regulatory decisions on mobile termination rates (MTR), reference interconnect offer (RIO), bitstream access (BSA) and wholesale line rental (WLR) that led to significant price pressure. However, we saw encouraging signs of recovery in the fourth quarter with 4.1% growth, as compared to the period a year earlier when the first and most stringent regulatory reductions to MTR and RIO were implemented.

Looking ahead

The outlook to economic indicators for 2008 is positive. Poland’s GDP is expected to grow by 5% to 6% in real terms, with inflation we believe to be contained around 3% and unemployment levels falling to between 8% and 9%. On this basis, TP Group expects the traditional telecoms market to develop at a relatively fast pace, with the value of the total market growing in the range of 2% to 4%. We anticipate three main drivers for this development:

• Double-digit growth in the mobile retail market, with further potential for higher service penetration;
• Reasonable growth to be resumed in the broadband market after a slowdown in 2007, with volume growth comparable to 2007;
• A rebound in the wholesale market, despite the additional 15% MTR decrease scheduled for May 2008.

The fixed voice market will continue to decline, but at a slower pace. The total value of the Polish telecoms market as a percentage of GDP should remain above 3%, although it is gradually converging with Western European levels. Meanwhile, adjacent market segments, in particular ICT and Pay TV, are expected to post double-digit growth again in 2008.