BMI's Executive Summary

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The Sector At A Glance

Key Insights On The Telecomunications Sector of Croatia

In the second quarter of 2007, the number of Croatian mobile subscribers grew by 3.4%, which meant that Q207 was a stronger growth quarter than Q107, when the sector grew by just 2.4%. Nevertheless, with the Croatian sector having achieved 5.8% mobile subscriber growth in the first half of 2007, BMI decided to upgrade its growth predictions for 2007 as a whole. Although we previously suggested that the sector would expand by 9.5% in 2007, we now estimate that mobile subscribers will increase by as much as 12.5% in 2007, to reach 4.911mn by the end of the year.

Croatia's mobile sector continues to be led by T-Mobile, which had a 48.1% share of the market at the end of June 2007. Despite the dominance of T-Mobile and its closest rival, Vipnet of the Telekom Austria group, both operators appeared to lose market share to third ranked Tele2 Croatia in Q207. Following numerous reports about Tele2 Croatia's financial difficulties in the early part of 2007, the country's third largest mobile operator appears to have had a comeback, securing 50% of new subscribers in the second quarter of 2007 and increasing its subscriber base to 400,000 by September 2007. By the end of June 2007, Tele2 had boosted its share of the market vis-à-vis T-Mobile and Vipnet. Meanwhile, it was reported in October 2007 that Tele2's Swedish parent company had increased its stake in its Croatian mobile business from 51% to 93% via a HRK120mn (US$23mn) recapitalisation. As a result of Tele2's capital investment, the stake in Tele2 Croatia which previously belonged to Croatian private equity fund Quaestus, has been reduced from 49% to 7%.

In August 2007, Croatia's mobile sector also saw the arrival of its first mobile virtual network operator (MVNO). The new entrant was formed out of a partnership between telecoms firm TelCro and the Croatian bank Zagrebacka Banka. The MVNO service is offered in partnership with T-Mobile Croatia.

One of the most significant announcement in recent weeks, was the news that the Croatian government planned to divest 32.5% of national incumbent T-Hrvatski Telekom (T-HT) for HRK265 (US$51.8) per share. The sale would leave the government with a 9.5% stake in T-HT, down from its current 42% holding. The 32.5% stake will be split between domestic private investors, who will take 25% of T-HT, and institutional investors, which will acquire 7.5% of the company. Germany's Deutsche Telekom will continue to hold a majority stake of 51% in T-HT. T-HT continues to retain a near monopoly over the provision of fixed-line services in Croatia, despite ongoing attempts by the sector's regulatory authorities to improve the lot of alternative operators. Nevertheless, a number of companies have been making steady inroads into Croatia's broadband sector, including Metronet which, in September 2007, signed an agreement to purchase rival broadband operator, Vodatel. Vodatel currently provides satellite-based TV, broadband and voice telephony services to residential and business customers; its acquisition by Metronet has therefore significantly boosted Metronet's position in Croatia's residential segment, which Metronet itself entered in May 2007.

Contents

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Chapter 1 - Executive Summary

Chapter 2 - Business Environment

Eastern European Markets

Croatia

Table: Emerging Europe Business Environment Ranking

SWOT – Croatia’s Telecommunications Industry

Chapter 3 - Industry Forecast Scenario

Fixed-Line

Table – Croatian Telecoms Sector – Fixed-lines - Historical Data & Forecasts

Internet

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

Mobile

Table: Croatian Telecom Sector – Mobiles – Historical Data & Forecasts

Key Risks to BMI Forecast Scenario

Chapter 4 - Macroeconomic Forecast Scenario

45% Growth Expected For Full-Year

Table: GDP, Output and Population

Risks To Outlook

Chapter 5 - Country Snapshot: Croatia 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

Section 3: Labour Market And Spending Power

Table: Employment Indicators

Table: Consumption and Stratification

Table: Wages per year

Chapter 6 - Competitive Landscape

Market Structure

Table: Key Players: Croatia Telecoms Sector

Table: Selected Telecoms 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/ Internet

Mobile

Table – Croatian Mobile Market, Q306

Table – Croatian Net Additions Q306

Table: Croatia Wireless ARPU2005-06 (EUR/user/month)

Industry Developments

Chapter 7 - Company Monitor

Regional Case Study: Alcatel

Table: Alcatel Recent European Contract Wins

Selected Profiles – Operators

T-Hrvatski Telekom

VIPNet

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:.