LONDON-The Baltic region covers an area of 174,000 square kilometers, with approximately 8 million people generating US$13 billion in gross domestic product (GDP). But while Estonia, Latvia and Lithuania may seem similar countries to an outside eye, in reality they boast quite different cultures, heritage and aspirations. Historians, for example, claim the Lithuanian language is the oldest of the official national languages widely spoken in Europe.
Similar to other eastern European countries, the Baltics’ telecommunications market started becoming an industry only after separation from the Soviet Union. Today the region is one of the most competitive marketplaces in the world, with more than 15 networks competing in the cellular industry alone.
Estonia
Estonia was the first of the three Baltic markets to open cellular communications to competition. It emerged on the brink of Estonian independence in 1991. Initially, the mobile market was limited to one analog network, but in 1995, cellular services were expanded with two GSM 900 (Global System for Mobile communications) systems.
Estonian Mobile Telephone Co. (EMT-Eesti Mobiltelefon), a joint venture of Sonera (24.5 percent), Telia International (24.5 percent) and ETC (51 percent), has a license to operate three networks.
EMT launched analog service in April 1991 in the capital city of Tallinn. As of mid-1998, the network had one L.M. Ericsson switch based in Tallinn and more than 200 base stations, covering 98 percent of the territory and 99 percent of the population.
EMT launched a GSM 900 network at the end of 1993. The original network, with base stations in Tallinn, routed GSM 900 traffic to a Sonera switch in Helsinki. By the end of June 1998, the service covered 95 percent of the population and 75 percent of the territory with 300 base stations and reportedly 104,000 subscribers.
On 10 January 1995, Radiolinja Estonia, a wholly owned subsidiary of Radiolinja Oy, the Finnish private GSM 900 operator, launched its GSM 900 network in Tallinn. By mid-1998, the operator had expanded coverage to 98 percent of the population and 75 percent of the territory-offering services such as data and fax communications, call transfer, call barring, call waiting and call hold. Since commercial deployment, the operator has invested US$35 million in network development.
A third GSM license was awarded to the Ritabell consortium, known as Q GSM, at the end of 1995. The company was headed by Millicom International (48 percent) and Levicom (52 percent). Last September, Millicom sold its stake to NetCom for US$55 million.
Total investments to deploy the Q GSM network are expected to reach US$57 million, of which US$26 million had been spent on Siemens switches and base stations as of year-end 1997. Q GSM’s 15-year license requires 50-percent population coverage by 2000. Ritabell’s network, launched in May 1997, covered all main roads and principal towns, using 100 base stations, by the middle of 1998.
A liberalized market environment, service price reductions and relatively stable economic conditions make Estonia the largest cellular market of the three Baltic countries. The cellular market is expected to continue to expand due to the presence of four networks, low tariffs and prepaid services. The Strategis Group projects approximately 563,000 cellular subscribers in Estonia by 2007, for a penetration of about 33 percent.
Latvia
There are two licensed operators in Latvia: Latvian Mobile Telephone (LMT) and Baltcom GSM. Each operates a GSM 900 network, and LMT additionally operates an NMT 450 network. With only two operators, additional licensing is expected to take place, possibly by early 1999. It is anticipated the third licensee would deploy a GSM 1800 network in late 1999 or 2000.
Until the end of 1995, LMT had monopoly control to provide cellular service in Latvia. The operator, owned by Sonera (24.5 percent), Telia International, Latvian Radio & TV, VEF and Lattelekom, manages two cellular networks, an NMT 450 system launched in October 1991 and a GSM 900 network launched in January 1995. Both systems were supplied by Nokia.
The NMT system offers coverage to 95 percent of the population and roaming to and from neighboring Baltic and Scandinavian nations. There are no plans to shut down the NMT 450 network; LMT’s coverage strategy has been to continue to support NMT in rural areas, while introducing GSM 900 across the urban landscape.
Latvia’s GSM 900 network initially covered Riga and nine other towns. In 1996, coverage was expanded through the addition of 34 new base stations (13 in Riga), and 662 channels have been launched. By 1998, coverage stood at 80 percent of the population and 30 percent of the territory.
Baltcom GSM is a Latvian-American joint venture owned by Metromedia International, Western Wireless Corp., The Walter Group and Alina. The operator was awarded a license in March 1996 and launched service in early 1997. Baltcom GSM selected Nortel Networks and Alcatel for the network infrastructure and plans to spend US$50 million to offer national coverage.
The total cellular subscriber base in Latvia has been growing at a rate of about 100 percent since the service was introduced in 1991. The introduction of GSM 900 in 1995 by LMT and competition from Baltcom GSM has led to increased market awareness, lower handset prices and the capacity to meet pent-up demand.
For many people in Latvia, mobile telephony offers a reliable and cost-effective telecommunications link, as the Lattelekom wireline network is based on analog technology and regularly disconnects customers. Strategis forecasts more than 640,000 cellular customers by 2007.
Lithuania
Mobile services in Lithuania have been fully open to competition since 1994, at which time two private GSM 900 licenses were awarded. There are three operational cellular networks in the country, one analog and two GSM 900.
Comliet launched the country’s analog network in 1992. The government awarded the GSM 900 licenses in 1994 and 1995, to operators Omnitel and Mobilios Telekomunikacijos (Bite GSM). Four GSM 1800 licenses and one GSM 900 license also were awarded to a total of four companies in June 1998. Two GSM 1800 licenses went to the existing GSM 900 operators, Omnitel and Bite GSM. A third was offered to an Estonian-based company, while the fourth (a dual-band license) went to Lietuvos Telekomas, partial owner of Comliet.
Comliet runs the only analog network in the country. The system, supplied by Nokia, was launched in 1992 and now covers 99 percent of the population and 98 percent of the territory with one switch, 500 voice channels and 110 base stations as of mid-1998. To date, approximately US$20 million has been invested in network infrastructure.
Omnitel launched its GSM 900 service on 16 March 1995. Omnitel is a privately held Lithuanian-American joint venture owned by Motorola Inc. (38 percent) and LitCom (62 percent), a partnership of Lithuanian and American business people. In June 1998, a consortium of Sonera and Telia signed an agreement to buy a 55-percent holding in Omnitel.
At the end of 1997, Omnitel had expanded coverage to 90 percent of the territory using 170 base stations and two switches. Omnitel’s license allows it to offer data communications, international gateways, paging and cable TV, in addition to GSM 900.
Mobilios Telekomunikacijos was awarded its cellular license in early 1995, and launched its GSM 900 service, Bite GSM, in October of the same year, using US$24 million of equipment supplied by L.M. Ericsson. Bite GSM was owned by Millicom International, Tele Danmark International and Lintel. However, in early January, Tele Danmark announced it was buying out Millicom’s shares.
At the end of September, Bite GSM had 130 base stations and one switch, which has been made possible through a total cumulat
ive investment of US$50 million.
The initial adoption of cellular in Lithuania was relatively slow due
to the comparatively high cost of cellular. In 1994, for example, a subscriber had to pay more than US$2,000 for connection and a phone. By the end of that year, there were only 4,500 phones in operation.
With the introduction of two GSM 900 operators in 1995, strong growth rates were achieved. Both GSM 900 operators overtook the original analog operator within 12 months of startup. By the end of 1998, the subscriber base had grown to approximately 300,000 customers.
The Strategis Group considers the Lithuanian cellular market to carry considerable growth potential, projecting 1.2 million cellular subscribers by 2007, representing a 29.6-percent penetration.
Luca Tassan is vice president of The Strategis Group Europe. The Strategis Group, with offices in Washington, London and Singapore, provides research and executes and formulates strategies in the wireless communications, competitive telephony, satellite and cable fields. Tel: (+44) 171-363-5600, www.strategisgroup.com
