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Telcoms changing as mobiles gain ground

  • 2004-01-29
  • By Roxanne Khamsi
RIGA - Faced with the recent dilemma to have either a regular phone line installed in her apartment or to purchase a mobile plan, Liene did not have to think long to make her decision. The 23-year-old office administrator from Riga says that having a mobile phone makes it easier for friends to reach her at any time of day and gives her added security on the road in case of an auto failure.

Like Liene, thousands of Balts have been switching to mobile phones for the sake of convenience and economy. Traditional telecommunication companies have seen their client base plummet and are scrambling to respond to sustain growth and win old customers back. Lietuvos Telekomas, for instance, announced two weeks ago that it lost 107,600 users, or 11.5 percent of its total client base, during 2003.
"In Latvia, like in other Baltic countries, the situation is different than it is in old Europe. The reason is that the fixed telephone network was not as well developed as in other European countries, and therefore the take off of mobile telephony in Latvia in particular was quite rapid," explains Juris Binde, president of Latvijas Mobilais Telefons, the largest operator of GSM mobile communications and cellular networks in Latvia.
Most young people are choosing mobile phones, says Binde. "The exception is maybe if they need some direct Internet connections with higher speed DSL connections," he says.
According to Vadim Grigorenko, director of the strategic and corporate planning department at Lattelekom, the Latvian voice market is split at 59 percent fixed-line and 41 percent mobile. But over the next five years the share of the former will drop to approximately 30 percent.
Grigorenko points out that Latvia has a lower per capita GDP in comparison with other European countries, and so its residents cannot afford both technologies. As a result, many simply opt for the mobile phone.
Other telecom experts point out similar trends in the neighboring countries of Estonia and Lithuania, where calculations place the number of people who own a mobile phone as higher than those who own a regular phone.
"Many, many people who are living in the countryside have mobile phones, and they are old people, pensioners, because it's more expensive to install fixed lines than to install mobile phones," explains Binde.
Though the mobile market may receive a boost in popularity with the advent of more technologically advanced phones, some of the bells and whistles of the past, such as Wireless Access Protocol, or WAP, have played disappointingly sour notes.
"WAP is one of the most unsuccessful projects in mobile telecommunications, unfortunately. Theoretically you can browse the Internet and look on the screen, but the practical problem is a lack of content because the Internet portal owners didn't want to reshape their information in this specific standard which is necessary for WAP browsing," says Binde. However, he adds that SMS text messaging, which allows users to send and receive short typed correspondence, has dramatically contributed to the popularity of mobile phones.
Lattelekom, which owns nearly a quarter of LMT, plans to expand its non-voice fixed line services, such as Internet access. Indeed, businesses are not expected to give up their landlines anytime soon.
"It's one stronghold. Businesses are unlikely to switch off their fixed line," Grigorenko says. Many companies, he explains, often require assistance with data transmission, IT solutions along with Internet service. The recent rise of value-added services, such as prepaid cards, also give new appeal to landline phones. Lower tariffs for fixed lines will also help draw clients back.
The strategies of companies in neighboring countries mirror those of Lattelekom.
"The decrease in fixed voice revenues is compensated by the growth of Internet, data and IT revenues, which is the fastest growing area in our business," says Ain Parmas, spokesman for Elion Enterprises, the Estonian telecom giant.
"In 2000 Internet, data communication and IT gave about 2 percent of Elion´s revenue. Today this gives about 30 percent and we expect that in 2006 already more than 50 percent," adds Parmas.
He also emphasized the importance of cooperation between Elion and its sibling company, EMT, which is the mobile branch of Eesti Telekom. "We all have already heard expectations that there will soon be telephones that can use fixed network through WiFi [wireless fidelity] technology in homes and offices and mobile network outside. This means that competition between mobile and fixed side will be replaced by the cooperation to serve customers in the best way."