1. LIBERALISATION AND (DE)REGULATION OF SLOVENIAN TELECOMMUNICATIONS MARKETS Nevenka Hrovatin Damir Cibic Matej Švigelj Berlin, September 2004

2. 2 INTRODUCTION Slovenian telecommunications market General indicators for Slovenia (2003): –2 mio inhabitants –685,000 households –12,273 EUR GDP per capita (17,090 EUR according to the PPP) Slovenian telecommunications market: –615 million EUR (2002) –Growth by about 8% since 2001 –2,6% of GDP –Telecommunications market segments by revenues (2002) Fixed telephony (40%) Mobile services (52%) Internet (6%) Data and leased lines (2%)

3. 3 INTRODUCTION Review of regulation Changes in EU and Slovenian legalisation –Regulation of SMP operators –Telecommunication Act Complied with old EU legislation In force at time of our analysis –Electronic Communication Act (April 2004) Adopted new EU regulatory framework Regulatory authority –ATRP was established in second half of 2001 –Performs all regulatory duties stipulated by the EU law –Sector approach to financing –Problems in regulator operations: Unsuitable education structure At enforcing its discretional right as independent regulator (limited by the Government in 2002 and operators) Methodology of regulation –Price cap is statutorily used (in practice: benchmarking)

4. 4 MOBILE TELEPHONY Market structure Technology development of mobile telephony in Slovenia (1991-NMT, 1996-GSM, 2003-UMTS) Four companies: –Mobitel (operator) 1991 NMT, 1996 GSM, 2003 UMTS Market share (2003): 73% –Debitel (service provider) Since November 1998 Market share (2003): 4,7% –Si.mobil (operator) Since March 1999 Market share (2003): 20% –Western Wireless International: Vega (operator, national roaming) Since December 2001 Market share (2003): 2,2%

5. 5 MOBILE TELEPHONY Number of GSM users

6. 6 MOBILE TELEPHONY Prices Average real price of a minute of call by companies (in SIT per minute)

7. 7 MOBILE TELEPHONY Problems and regulators activities MAIN CHARACTHERISTICS OF THE MARKET Concentrated market structure due to: –Late granting of licences to competing firms –High call termination prices between operators (high difference between off-net and on-net calls caused tariff mediated network externality) Competition leads to low prices Anomalies at granting UMTS licence –Brings back monopoly position at the market for 3G services MAIN ACTIVITIES OF THE REGULATOR In July 2002 appealed to operators to set prices based on the cost of efficient service provision Assigned status of SMP operator to Mobitel and Si.mobil (Nov 2002 and Dec 2003) Introduction of asymmetric model of call termination prices at the end of 2003 –Accepted by Mobitel and Si.mobil –Vega rejected the model and persists at its standpoint that ATRP should regulated end-user prices

8. 8 MOBILE TELEPHONY Comparison with selected countries Number of mobile operators and penetration rate in benchmark countries Number of 2G operators: comparable Penetration rate: comparable (2 percentage points above EU) Number of assigned UMTS licence: lagging behind More concentrated market than in the EU (leading operators in 9 countries of EU do not exceed 50% of market share)

9. 9 FIXED TELEPHONY Incumbent Number of fixed lines of Telekom Slovenije (in 000) Year endPSTNISDNCentrex 199872646 0 199970482 21 2000664132 66 2001642180 70 2002580232111 2003563276130

10. 10 FIXED TELEPHONY Incumbent INCUMBENT’S TARIFFS Monthly subscription9,1 EU Local call/min2,2 €-cent/min Long distance call/min2,2 €-cent/min Monthly subscription is increasing. The call prices are decreasing in real terms since 2002.

11. 11 FIXED TELEPHONY Deregulation FIXED – TO – FIXED INTERCONNECTION CHARGES Phase One – Benchmarking (2003) Phase Two – Cost based (2006?)

12. 12 FIXED TELEPHONY Deregulation FIXED – TO – FIXED INTERCONNECTION CHARGES Phase One – Benchmarking (2003) Prices were set on EU average level: Single transit1,06 EU €-cent/min Double transit1,70 EU €-cent/min Local call2,2 EU €-cent/min Positive difference was introduced in 2002.

13. 13 FIXED TELEPHONY Competition New legislation Removal of all administrative barriers to entry fixed licences for free since 2003 Reference Interconnection Offer since 2004 Number of operators offering fixed voice telephony: 2 - 3

14. 14 BROADBAND Number of connections (000) YEARDSLCABLE end200217.00015.000 (est.) end200339.00020.000 mid 200453.00025.000 (est.)

15. 15 BROADBAND Number of DSL connections YEARIncumbentOthers end200339.0000 mid 200452.0001.000

16. 16 PROSPECTS Fixed Voice Telephony –From monopoly to competition (international calls) Broadband –From competition (dial up) to monopoly (DSL) Mobile services (Voice) –From monopoly to competition Mobile services (Data) and 3rd generation –Monopoly?

17. 17 NRA’s DILEMMAS Service competition –Fixed telephony Infrastructure competition –Mobile services –Data/Broadband