Telecommunications operators in Central Europe (CE) keep on searching for new revenue sources and diversification of the portfolio of services offered. Operators are increasingly interested in the provision of value-added services, ICT services, developing their own commercial data centres, television and financial services (insurance, credit cards, micro-payments). Lately also gas and electricity retail sales and in general cooperation with energy companies have been gathering momentum. Following the trends that may be observed in all of the telecommunications markets in EU, bundles are becoming more and more popular also in CE countries. However, as the main segments of the telecommunications market are getting matured, operators have implemented changes to their core offer.
They have added new services in order to increase their revenues and to counterbalance decline in growth of their traditional services. In addition to data transmission and a range of value-added services available to both individuals and businesses, operators are increasingly incorporating into their portfolios services that are not directly connected with the telecommunications industry. Besides IT services and financial services another growing segment is selling electricity.
The first operator, which started selling electricity and natural gas at discount prices to residential customers of its telecommunications services in the CE market, was Magyar Telecom, which is a part of the Deutsche Telekom group. Its energy retail service has been extended also to business clients in some parts of the country since April 2010. Two years later, the company offered the service to customers in the whole country. Magyar Telekom’s financial results show that a stable growth in revenues from energy services has been able to successively counterbalance dropping revenues from fixed-line voice services. Following a growing demand, the share of revenues from energy services in the total sales increased from 0.5% in Q1 2011 to 13.2% in Q1 2013. In Q2 2013 energy services have brought HUF 6bn (approx. €20m) lower revenues compared to Q1 2013, which is, however, a seasonal fluctuation and the year-on-year growth of the revenues amounted to as much as 200%. For telecommunications operators, cooperation with energy companies is not only a way to win new clients by offering packet services and reducing their costs, but also a strategy for reducing churn ratio and winning their clients’ loyalty. On top of that, in September 2013 MOL Group, the Hungarian major oil company added mobile telephony services to its portfolio as a result of an MVNO contract signed with Magyar Telekom in July 2013. MOL Group offers discounts to its subscribers using any of MOL’s 333 petrol stations across the country. Moreover, the pre-paid tariff package of MOL mobile has lower prices for the company’s loyalty programme participants. The stations also sell mobile handsets and pre-paid top-up cards.
Lately Polish operators are the most interested in enriching their offers by adding energy retail. In October 2012 Netia, the largest Polish alternative operator, started launching a project to offer its clients electrical energy with RWE, one of the five biggest energy groups in Europe. However, the Netia/RWE offer is aimed at SOHO/SME using up to 50 MWh of electricity a year (around 2m entities in Poland). Other companies that signed cooperation agreements have been: PGE, the biggest Polish power company, and Orange, which is a part of France Telecom. According to the contract signed in February 2013, PGE and Orange are supposed to offer each other’s products and services through both companies’ retail chains. Moreover, companies are considering a cooperation in other fields due to the fact that PGE produces 40% and distributes 26% of the energy on the Polish market. However, a final decision about the further cooperation will be made after the pilot project in Poland, probably by the end of the year. One month after Orange, in March 2013, PTC, controlled by Deutsche Telekom, and Tauron, one of the largest electricity distributors on the Polish market, also started a strategic cooperation combining telecommunications and electricity services. The companies claims that a new and more competitive offer should be available for customers by the end of 2013.
Representatives of Polkomtel, owned by Zygmunt Solorz-Zak, have recently mentioned that they will soon come up with combining its telecommunications services with those of ZE PAK, also controlled by the businessman. Polkomtel, a Polish leading mobile operator, and ZE PAK, the second largest Polish producer of electricity generated from brown coal, will launch a package of electricity, internet and television in the near future.
Interestingly electricity services have been offered not only by largest operators, but also by smaller players from the telecommunications market. In January 2013, Telekomunikacja Novum, an alternative fixed-line operator in Poland, was granted a permission to distribute electricity on the retail market. The operator created a new offer for individuals, bundling fixed-line telephony and electricity.
Despite the fact that in other CE countries there have been no similar initiatives so far, in our opinion we will see them in the near future. Telecommunications operators in actually all of the CE countries have experienced a growing competition in recent several years, which is quite an opposite to what it has been seen on the energy market. Thus the former companies have invested in CRM systems, customer care and learned the mechanisms of alluring clients away from competitors as well as retaining customer bases. Consequently energy operators can benefit from the experience. Possibility to address bundles to well-mapped consumer groups by telecommunications operators are also of key importance. Last but not least, telecoms are one of the main consumers of electricity, therefore, there will also be a trend to sign partnership contracts with energy groups in order to reduce own costs and gain better electricity purchase conditions. Moreover, the largest electricity companies hire a lot of employees and are significant consumers of telecommunications services. What is more, a link between the two group of companies will be also smart grid and home energy management. All in all, we can expect that the power sector will be one of the main target segments for the operator’s further expansion not only on the Polish and Hungarian market but also in other CE countries.
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