BMI's Executive Summary

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The Sector At A Glance

Key Insights On The Telecomunications sector of Bosnia & Herzegovina

In December 2006, news spread that Telekom Serbia had completed its acquisition of a 65% stake in the Republic of Srpska’s regional incumbent, Telekom Srpske. This was followed, in January 2007, by the announcement that HT Mobilne Komunikacije (formerly Eronet) was expected to start offering mobile services nationwide following its merger with parent company HT Mostar. The significance of these developments for the telecoms market of Bosnia & Herzegovina should not be underestimated, and we have therefore had to take their implications into account in our own growth forecasts. In the previous quarter, we raised our expectations of growth in the mobile sector, which we believe will follow increased investment in Telekom Srpske and HT Mobilne Komunikacije, as well as the implementation of HT Mobilne Komunikacije’s plans to extend mobile services across the entire country. We therefore maintain our expectations of strong mobile growth over the next five years, predicting that subscriber numbers will increase to more 2mn by the end of 2007 and nearly 2.9mn by 2011. In line with these predictions, mobile penetration will rise from just 44% in 2006 to almost 75% by the end of 2011. Meanwhile, prospects for 3G growth continue to appear limited, at least in the short-to-medium term. Although UMTS licensing is expected before the end of 2007, initial service is likely to be restricted to major urban centres, and could be further constrained by features such as high unemployment and low levels of income. Furthermore, despite the rapid growth of broadband services, which we expect to continue throughout our forecast period, broadband penetration remains very low and, even by 2011, we do not expect penetration to exceed 4%.

Bosnia continues to be situated at the bottom of our Business Environment Rankings table for Central and Eastern Europe. This is partly due to its relatively low political and economic ratings, which have both seen a slight quarterly decrease in light of concerns about the long-term impact of unemployment on the country’s economic health. Additional concerns focus on the political and economic challenges which will accompany moves later this year to end the role of the Office of the High Representative (OHR), and reform the country’s system of regional government. High levels of long-term unemployment, as well as the emigration of young people, are not trends that are conducive to long-term stable economic growth. They are also factors that could contribute to reduced growth potential in Bosnia’s telecoms market. Bosnia continues to have one of the lowest fixed-line penetration rates in Europe, with poor infrastructure quality and a lack of adequate infrastructure altogether in more rural regions. Greater investment in upgrading existing networks and services – together with increased competition at the national level – would undoubtedly be developments that would hugely benefit Bosnia’s telecoms market. BMI hopes that recent moves to privatise and restructure the country’s regional telcos will therefore be the first important step in this direction.

Contents

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Chapter 1 - Executive Summary

Chapter 2 - Business Environment

Eastern European Markets

Bosnia

Table: Emerging Europe Business Environment Ranking

Chapter 3 - Industry Forecast Scenario

Fixed-Line

Table: Bosnian Telecoms Sector – Fixed Lines – Historical Data & Forecasts

Internet

Table: Bosnian Telecoms Sector – Internet – Historical Data & Forecasts

Mobile

Table: Bosnian Telecoms Sector – Mobiles – Historical Data & Forecasts

Chapter 4 - Macroeconomic Climate

Another Good Year For Industrial Output

Unemployment Is A Major Problem

Table: Economic Activity

Chapter 5 - Country Snapshot: Bosnia Demographic Data

Section 1: Population:

Table: Demographic Indicators (2005)

Table: Rural/Urban Breakdown

Section 2: Education & Healthcare

Table: Education

Table: Healthcare: Vital Statistics

Table: Healthcare: Expenditure

Table: Wages per year

Chapter 6 - Competitive Landscape

Market Structure

Table: Key Players: Bosnian Telecoms Sector

Table: Selected Operators Financial Indicators

Fixed-Line Overview

Table: Regional Fixed-Line Penetration Overview

Internet Overview

Table: Regional Broadband Penetration Overview

Mobile Overview

Table: Regional Mobile Penetration Overview

Market Data Analysis

Fixed-Line

Table: Bosnian Local Market 2005

Internet

Table: Bosnia Broadband Subscriber Numbers 2004-2005

Mobile

Table: Bosnian Mobile Market H106

Table: Bosnian Mobile Market Post-Paid v Prepaid 2005

Industry Developments

Chapter 7 - Company Monitor

Regional Case Study: Alcatel

Table: Alcatel Recent European Contract Wins

Selected Profiles - Operators

BH Telecom

Chapter 8 - BMI Forecast Modelling

How we generate our industry forecasts

Telecommunications Industry

Chapter 9 - Appendix: Regional Demographic Data

Wages (ave labour force per annum), US$ PPP

Population

Household Spending Per Capita, US$

Private Consumption Per Capita, US$ PPP

Market Size, GDP, US$bn

Competitive Landscape for Europe Telecommunications Reports: Sample of Companies Ranked

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Commentary on key operators highlighting ownership structures, latest available revenue figures, market share analysis and ARPU counts. BMI forecasts for all headline macroeconomic indicators, including real GDP growth, inflation, fiscal balance, trade balance, current account and external debt. Company SWOTS Covering all leading telecommunications operators and manufacturers operating in each market, including competitive intelligence on geographic presence and competitive positioning against local companies; local market share; leading products, services and technologies; foreign direct investments, projects, merger and acquisition strategies.

Network of European Telecommunications Sources

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BMI's European Telecommunications Reports are based on an extensive network of multilateral organisations, government departments, telecommunications industry associations, chambers of commerce and company reports. Information sources include:.