BMI's Executive Summary

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The Sector At A Glance

Key Insights On The Telecomunications Sector of the Czech Republic

The number of Czech mobile subscribers grew by just 1.1% in Q207; this was just slightly higher than the 0.8% growth rate seen in the previous quarter. Overall subscriber growth for the first half of 2007 amounted to 1.9%, which is quite a bit lower than the 2.8% growth which was seen in the first half of 2006. These trends appear to confirm our general belief that growth in the sector is finally slowing down.

Despite this, BMI still expects to see faster growth in the third and fourth quarters, as has tended to be the norm in the Czech mobile sector. We continue to be optimistic that our anticipated 5% growth rate for 2007 will be met. In the second quarter of 2007, Vodafone continued to gain vis-à-vis its market rivals, acquiring another 50,000 subscribers, 29,000 of which were postpaid; Vodafone's share of the market consequently increased to 20.1%. In contrast, Telefónica O2's market share remained unchanged at 39% while T-Mobile's share dropped to 40.9%. Meanwhile, in Q207, O2 reported a meagre 1% increase in 3G subscribers, although the operator did announce that it had crossed the 100,000 3G subscriber mark. O2's postpaid ARPU remained constant in the second quarter, at EUR32.2, while the other two operators reported an increase in postpaid service ARPU which amounted to at least 3%. At this stage, it is uncertain whether this Q207 marks the start of a new trend in postpaid ARPU (possibly reflecting the impact of increased data service usage) or whether it is simply a temporary adjustment.

In this latest update on the Czech telecoms sector, we have made some revisions to our forecast for the development of the country's broadband sector. Based on the most recent data available, we believe that the sector had around 1.087mn broadband connections at the end of 2006, and a penetration rate of 10.7%. BMI estimates that, by mid-year 2007, Czech broadband subscribers numbered 1.276mn. The Czech broadband sector has become ever more competitive in recent months, with a growing number of providers entering the market and offering both ADSL services and fixed wireless access (FWA).

Although the number of Telefónica O2 wholesale ADSL access lines decreased in the second quarter of 2007, it appears that this decline is related to the growing use of local loop unbundling as the preferred means by which alternative operators deliver ADSL services. Although it has not disclosed actual figures Telefónica O2 suggests that the number of ADSL access lines provided by other operators using LLU is growing. BMI's most recent predictions for the growth of the Czech broadband sector envisage a growth rate of 34.8% for 2007. We anticipate the number of subscribers rising to 1.465mn by the end of the year; this will result in the country having a broadband penetration rate of 14.4%.

In other news, the Czech telecoms sector saw the arrival of yet another new operator in Q207, following the announcement that Telekom Austria subsidiaries, eTel and Volný would merge to form a new company, Telekom Austria Czech Republic. As separate companies, both eTel and Volný have evolved over the past few months into powerful challengers to Telefónica O2's market dominance. The consolidation of their service portfolios under the leadership and brand of their parent company suggests a new intensification of Telekom Austria's own competitive strategy within the Czech Republic.

Contents

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Chapter 1 - Executive Summary

Chapter 2 - Business Environment

Czech Republic

Table: Emerging Europe Business Environment Ranking

Chapter 3 - Industry Forecast Scenario

Fixed-Line

Table: Czech Republic Telecoms Sector Fixed-line Historical Data & Forecasts

Internet

Table: Czech Republic Telecoms Sector Internet Historical Data & Forecasts

Mobile

Table: Czech Republic Telecoms Sector Mobile Historical Data & Forecasts

Chapter 4 - Macroeconomic Forecast Scenario

Changing Structure Of Growth

Risks To Outlook

Table: Growth And Output

Chapter 5 - Country Snapshot: Czech Republic 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

Czech Republic Telecoms Sector - SWOT Analysis

Chapter 6 - Competitive Landscape

Market Overview

Competitor Analysis

Table: Key Players: Czech Republic Telecoms Sector

Table: Selected Operators Financial Indicators

Key Players

Fixed-Line

Table: Regional Fixed-Line Penetration Overview

Internet

Table: Regional Broadband Penetration Overview

Mobile

Table: Regional Mobile Penetration Overview

Market Data Analysis

Fixed-Line

Internet

Mobile

Table – Czech Mobile Market, Q306

Table: Czech Mobile Market Net Additions, 2006

Table: Czech Wireless ARPU, 2005-6 (EUR)

Industry Developments

Chapter 7 - Company Monitor

Regional Case Study: Alcatel

Table: Alcatel Recent European Contract Wins

Selected Profiles – Operators

Telefónica O2 Czech Republic (formerly Ceský Telecom and Eurotel Praha)

T-Mobile Czech Republic

Vodafone Czech Republic

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:.