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Albanian Mobile Communications
4. Literature review
Market segments characteristics. (Demands type)
Business and Residential are the main customer segments for Data and Internet services.
According to ERG Report on regulation of access products necessary to deliver the business connectivity, business customers distributed with remote branches/offices nationally, tend to order wholesale services ordered by the headquarter rather than ordered as separate packages by the remote branches and while this is typical for big and organized business, smaller one sometimes find themselves convenient to buy and use the retail offered services (ERG, 2009).
Regarding the demand from business customers different needs are found and a clear line between the high-end and low-end business customers can not be set but what separates them is often the quality of services demanded and the way of ordering the services as a complete network solution from one provider only or having different providers and the company itself does the role of the integrator (ERG, 2009).
Another common behavior of businesses is the demand for a full solution for communication services covering the range of fixed and mobile services while it is noted that big business and in addition while the standard users are more sensitive for the price, the business big ones stick to well known brands, quality and reliability of services and after sales support provided (ERG, 2009).
Big Business Multi-site customers seem to have different needs when compared to residential users or to small business users: Different services such as mobile, fix, data networking, convergent products and value added services; high quality communication services; quick response and good support; dedicated personnel as account manager (ERG, 2009)
5. AMC Company Profile
Albanian Mobile Communications (AMC) is the biggest Mobile Network operator in Albania and is part of the Cosmote Mobile Telecommunications, the mobile part of OTE SA Greece. Part of Cosmote Group which is operating in 4 countries Greece, Albania, Bulgaria and Romania, AMC is operating in Albanian market since 1996 and has constantly dominated the market by means of customer base and revenue.
AMC is founded as a state owned company by early 1996 and launched the standard GSM services on May 1996. It was privatized in 2000 when Cosmote Telenor Consortium became the controlling shareholder privatizing 85% of the shares while around 2% were provided to the employees and the rest of 13% remained to the state. Now 97% of the shares it is owned by Cosmote and 3% by the employees.
At the time of privatization AMC was offering the services only to about 30,000 postpaid customers and only at xxx% of the territory and xx% of the population. (ASK ILIR)
After the privatization, due to the low level of development of fixed telephony, lack of real completion and the investments made by the Greek company Cosmote, the company developed very fast by expanding the network to all the territory of Albania, offering the services to prepaid customers segment and adding a broad range of mobile services such as SMS, MMS, VMS and Internet access.
After Vodafone entrance in the Albanian market in 2001, the competition in the market forced the constant decrease of prices, increase of number of services and their quality. The third operator, Eagle Mobile, entered in the market in 2008 and further busted the competition among the three operators. Positioning itself as a low cost services operator, Eagle mobile initiated a price war in the market forcing further decreases of services prices.
Today AMC is the biggest Mobile operator in Albania, dominating the market by having around 1.9 million of customers with 43.3% market penetration. AMC is covering 99.8% of the population and 90% of the territory in Albania. Roaming agreements are established with more than 300 GSM operators worldwide. Major mobile product and services offered to individuals are: voice, SMS, MMS, voice mail, internet access, WAP portals and push email for residential. Corporate push email, data internetworking, ISP and VPN services are provided to corporate customers. EDGE technology is implemented covering 86% of the population and 63% of territory offering the possibility to the customers to access the internet through the mobile at acceptable rates. 3G technology is not yet licensed in Albania but the licensing process is expected to start during this year.
AMC has around 530 employees highly qualified and trained. Around xx% of employees have a university degree and xx% of them are under the age of xxx. Personnel is organized in three main division, Commercial, Technical, Finance and Operations & Administrative.
The revenues for 2008 were at 191,272 millions, the OIBDA margin was at 64.7% and the net profit margin was at xxx%. During 2009, due to several factors present in the market such as the third entrant competition, world financial crises and intervention of regulatory body in decreasing the retail and interconnection termination tariffs AMC has faced some challenges on realizing the revenue objectives although the figures were still very good: revenue at 145,744mil, OIBDA at 57% and net profit at xxx%.
For the future, considering the expected fierce competition due to also to the entrance of the fourth operator in the market and present financial crisis as well, AMC is looking to realize the targets through orienting the business towards the customer, finding other revenue streams, offering a wide range of products and services, the best technology in the market and best network quality. Offering of 3G services within 2010 and enrichment of products portfolio with services that this technology makes possible are considered as good opportunity for AMC in the near future for increasing the revenue.
6. Current Situation Analysis
6.1 General environment factors
Albania is a small country located in southeastern Europe bordered by Adriatic Sea, Greece, Montenegro and Kosovo. Territory is 28,748 sq km and population at 3,639,453.
After the Second World War, Albania established a communist regime which has ruled the country for 46 years until 1991 when it collapsed and a new democratic system was established. Albania has gone through a difficult process of transforming society to a democratic one and of developing the market economy. The process has proven to be very challenging and although a lot of progress has been done, the country is facing a lot of problems and deficiencies related to corruption, week infrastructure, unemployment, organized crime and sometimes lack of political stability.
Since starting the transition process in 1991, the progress of Albania has been impressive although the transition period has taken longer than enough. Albania has established the institutions of democracy, has developed the capacities of public institutions, and has established the foundations of market economy (World Bank, 2010). Albania has joined NATO in 2009, has signed in 2006 the agreement for Stabilization and Association with EU and is one of the potential candidates for joining the EU.
As part of EU association agreement, Albania since ten years has transformed and adopted the legislation based on EU recommendations and framework.
The legislation improvement has been a continuing process and is performed under the tough monitoring and supervision of EU. In this regard, currently we may say that Albania has a very good legislation frame although there are evident gaps between the legislation and practical implementation of the laws in the country.
The country has joined the WTO in 2000 and since then has adopted its international trading policies in accordance with the agreement with this organization.
Government policies and strategies on Electronic communications are focused on liberalization, development of market and competition, attraction of foreign direct investments, protection of consumer and are developed in compliance with the National Strategy for Development (covering years 2007-2013) and the EU integration directives.
Albania is a country with low to middle income with a gross domestic income per capita of $3740 in 2008. The Economy of the country has been totally transformed during the transition period from a communist economy towards a market-based economy. Albania has achieved a sustainable economic growth, while containing inflation almost constant every year. During the transition period, the structure of economy has been transformed from an agriculture and industry to services and construction. Large scale migration has fueled high workers' remittances, which make up around 8-13 percent of GDP (World Bank Web Page, 2010, Albania in Brief). During that period the GDP growth rates of around 5-6 percent per year have been achieved while the poverty level has been reduced constantly. The absolute poverty rate was 25.4 % in 2002 but dropped to 18.5 percent in 2005 and to 12.4 percent in 2008. The extreme poverty rate decreased from about 5 to 3.5 percent but inequality has increased significantly (World Bank Web Page, 2010, Albania in Brief).
According to World Bank data, the Albania GNIP (Gross National Income per Capita) in 2008 was at 3840$ ranking at 113th position while PPP (Purchasing power Parity) was at 7950$ during 2008 ranking at 108th position worldwide (World Bank, 2008).
The GDP composition by sectors the year 2009 was as following: agriculture 20.06%, industry 18.8% and services 60.6% (CIA Fact book, 2010). In 2009 unemployment rate was at 12%, population under the poverty line 25%, Inflation rate 2.1% and has been kept within the range of 2-4% since 2002 (CIA Fact book, 2010).
Major agriculture products are wheat, corn, vegetables, potatoes, fruits, sugar, grapes and meat while the industrial ones are food processing, textiles and clothing, oil, hydropower, cement, chemicals, mining and basic metals.
In 2009 the exports were at 1994 billion while the imports were at 3602 billion (CIA Fact book, 2010).
Strong growth has been seen during the years 2002 -2008 at the rate of 14-15% in the construction industry which has been considered as very successful one in the country.
Evidences of global crises effects have been shown during 2009 when the GDP growth was 4% less than 2008. The remittances and bank deposits have declined much during 2008 and 2009 causing the slowdown of consumption while imports went down from 4,898 in 2008 to 3.602 Billion in 2009 (INSTAT, 2010).
The deposit rates during 2007 were at the average of 6.3% while the bank interest rates were at 13.6% (INSTAT, 2010).
Following are shown the main competitiveness indexes for Albania provided by the Harvard University, M. Porter in The Global Competitiveness Report.
M. Porter, The Global Competitiveness Report, 2008-2009
Based on this report, Albania is categorized in the group of countries being at the stage of efficiency driven economy, has many deficiencies in infrastructure, technology and innovation and market efficiency while fits with the standards of this category for macroeconomic stability, health and primary education, labor market efficiency and institutions,
M. Porter, The Global Competitiveness Report, 2008-2009
From the above report we can see that corruption, inadequate infrastructure, governing efficiency and bureaucracy and Tax regulations are the main problematic factors for doing business in Albania.
World Bank, Doing Business 2010 Albania
According to World Bank, Albania is currently well positioned to continue with its strong economic growth and is able to make significant movements towards the integration with the European Union but the government must strongly address the governance problems, maintain a stable macroeconomics framework, improve the business environment and attract investments, upgrade public infrastructure, develop its human capital and make sure that the development benefits are fairly distributed to different categories of society with a special attention to supporting the poor ones (World Bank 2010).
Although it has sustained high growth rate by keeping the microeconomic stability during the last decade, Albania remains still one of the poorest countries in Europe showing a large scale of informality in economy, a week and inadequate energetic and transportation infrastructure. Shortages in Energy caused from the dependency from hydropower plants and inadequate distribution infrastructure contribute much in a poor business environment and is a factor for not being successful in the process of attracting the foreign investors.
According the European Commission 2009 report , Albania has kept and maintained the macro-economic while the worldwide crises had only a limited impact on the country, inflation was low, exchange rate has been stable, liquidity of banks have been ensured (EU Commission, 2009)
According to INSTAT, 46 % of the population is between the age of 15-44 years and average age is 32.1 years therefore we may say that Albania has a young population however the population has started aging for the reason of decreased rate of births and longer life rate (INSTAT,2010). The number of people living in urban areas has increased from 35.8% in 1989 to 45% in 2004.
Consumer telecom utilization and spending is high and at around 6 % of the total household expenditures. New generation like the new technology of mobiles and are followers of offers.
Some future social trends are mentioned below:
- Urbanization will continue therefore increasing the chances for the fast rollout of broadband technologies
- Economic inequality will increase, therefore the customer segmentations should be considered and product and services should be customized to each segment needs
- Family size will decrease
- People joining the social networks will increase
The country has adopted the national legislation in accordance with the EU 2003 regulatory recommendations and framework. The Law No. 9918 (May 19, 2008) is the main legal instrument for the electronic communications industry regulation. It defines the responsibilities of government and regulatory institutions for this regulation.
Based on this law, the Minister of State for Reforms and Parliamentary relations is the administration body for the electronic communications services and it is responsible for drafting the related legislation and for preparing the plan for radio frequencies. Based on the proposals submitted by the regulatory, the Ministry has the authority to approve the tenders for limited spectrum assignment and universal service providers. In 2009, the Council of Ministers has approved the National Frequency Plan while there is under the approval process the policy for the sector development for the period 2009-2014 which is oriented on liberalization, European integration and convergence.
The regulatory authority (AKEP) is an independent, self-financed entity which covers the regulatory tasks for the electronic communications. Under its authority belong also some tasks related to adoption, administration and implementation of legislation. For the industry of Electronic Communications, the regulatory body should safeguard the competition, guaranty the quality of services offered and delivery of them, protect the consumer, license and develop the market through promoting the investment and latest technology implementation.
AKEP can impose prices control, set administration fees and define methodologies for regulation of tariffs and defines its own structure and salaries without any intervention from the Ministry. The financing is taken from fees applied to operators and service providers. It reports to the parliamentary assembly. The privatization of Albtelecom and Eagle Mobile, in 2007, increased the level autonomy and independence for the AKEP and the Ministry although the state still owns 25% of the shares. Lately the government has announced these shares will be sold.
Another institution was established by the government in April 2007, National Agency on Information Society (NAIS) which role is to coordinate the government activities for the information society and communications. It prepares and proposes the national strategies, draft ICT legislations and coordinate the projects of government in ICT.
With regards to market access and authorizations, Albania has moved forward with the gradual process of liberalization. In 1998 the liberalization started with the rural local networks, then in 2003 was liberalized the operations for the domestic long-distances networks and in 2005 for international ones. In 2006 the market was liberalized for urban operation of local alternative providers.
The law of 2008, established the concept of “General authorization” based on which the networks and services which do not require the usage of limited resources could start operating without getting a license but just by sending a notification for their start to the regulatory authority within 15 days of operations. Based on this, the need for getting the license remained only for the frequencies and numbers.
Based on the law, AKEP can use the SMP (Significant Market Power) designation mechanism in order to regulate the competition in the market. The decision for designation should be based on a Market Analysis procedure results. In 2007 AKEP has designated AMC and Vodafone as SMP in the market of retail mobile services and for the wholesale voice termination. Based on that, AKEP imposed to these two operators obligations related to non-discrimination, transparency in RIO (Reference Interconnection Offer), imposed the prices of interconnect termination by cutting them by 31.2%% and applied a reduction in retailed prices of 30% for on-net and 40%for the off-net calls for a period of two years.
In 2007, AKEP has designated Albtelecom as SMP in six markets related to fixed voice services offered to customers and for voice transit services. Obligations were set to Albtelecom including the imposed reduction of retail and transit tariffs.
Following a review of the markets in wholesale and retail tariffs done in 2009, the competitive safeguards LLU and CS/CPS were imposed to Albtelecom which are not yet implemented.
AKEP has already launched several markets analysis procedures on most of the wholesale and retail markets such as: Mobile wholesale market for call termination, access and call origination; fixed retail access and call services for wholesale interconnection.
In December 2009, AKEP introduced to operators a reference document with the model of BULRAIC cost calculations for mobile services MTR based on which the data have been provided to AKEP by the operators. As the result of these analyses, it is expected that AKEP imposes the Mobile Terminated Rates for national calls while the rates for the international calls will be reviewed.
During 2009 AKEP has launched the market analysis and public consultation process for wholesale and retail leased lines markets and finalization of it is expected by mid 2010. As result of public consultation process, is expected to be defined the services, demands, providers, supply structure and markets and then based on these is expected that regulatory designates the SMP operators for which the tariffs for their services will be regulated.
During Q1 2010, AKEP has launched a public consultation process on “The rule for the indexes of service quality” which is expected to be finalized during Q1 2010.
The above mentioned actions which regard regulation of competitions can be considered as steps to develop the competitive safeguards environment, however we can mention other steps not yet realized by the regulatory although the process has already started. Such missing measurements are: number portability, carrier selection and pre-selection (CS, CSP) not in practice yet, local loop un-bundling (LLU) not in practice yet, national roaming, MVNO and whole sale line rental.
Number portability public consultation is in progress and based on AKEP plans, the service will be available in the market by end 2010 while the process for licensing for wireless broadband spectrum (WiMAX and mobile 3G) are expected to start with public consultations opening by March 2010 and be finalized by mid 2010.
According to latest European Commission assessment, there were noted some progress including the alignment of primary legislation, while still some secondary lines laws have to be adopted yet, market liberalization and competition still are at early stage and administrative capacities of the ministry and regulator was not sufficient (Cullen, 2008).
In the area of mobile communication technology, GSM 2.75 technology (EDGE) is implemented since 2006 and now three operators offer it to the customers, AMC, Vodafone and Eagle. Regulatory has not yet provided the licensing for the Mobile 3G CDMA and broadband technologies HSPA and HSPA+. There is a delay in this aspect and the licensing for 3G technologies may be provided only now, at the end of lifecycle for 3G technology and at the time that other markets have started trialing and adopting the 4G network technologies (LTE).
Video Digital Broadcasting (DVB-H) services are offered by three operators (DIGITALB, TRING and TV SHIJAKU) already to the market through terrestrial or satellite broadcasting.
Number of PCs and PC utilization at home is low and estimated to xxx% of the houses while the utilization in companies and government is high. Internet services are provided in the country by more than 36 ISPs and technology for access is mainly fixed broadband xDSL, hybrid fiber coax and dial-up.
Wireless broadband spectrum available for WiMAX is not licensed yet by the regulatory while the WiFi networks are frequently used for the Internet access in cafes. Points to multipoint systems such as LMDS are not present in the country.
Fiber networks are present only in the main cities such as Tirana and Durres and implemented by some ISP-s for the purposes of internet access or triple play services provided to the end user. Fiber backbone is missing and the mobile operators' backbone is mainly build of microwave transmission links based on SDH or PDH technology.
Two of mobile operators have taken already some steps on offering the mobile fix substitution services to the customers but not providing the convergence of the mobile and fix telephone number.
Content development is weak and mainly is based on external international resources.
The main technology factors that will shape the next decade of electronic communications development are the following:
- Convergence of networks
Fixed and mobile network differences will vanish and a common network providing integrated services will serve the customers. Mobile to fix substitution and integration has already started
- Convergence of network technologies to an all IP networks
Traditional telecom networks and internet (ISP) will merge together to a next generation carrier network which is based on all IP technology.
Services will clearly separate from transport networks and competition will be focused and oriented on services
- Convergence of services
Convergence of networks and network technology will make possible to design, combine and deliver to the customer services which traditionally have been provided before by different technology, networks and vendors such as triple play services, (video, voice and internet) provided all at one network access point, accessed through same application environment which run in many different types of devices.
- Unified services access and unified messaging
Customers can access through same software environment and through same or different devices and from everywhere (office, home, when traveling) same set of applications and services.
- Reduction of cost for hardware and increase of software role and power
Software will run on standard hardware. Big software players will play a big role while the network HW vendors will become more software oriented.
- Growth of video content and internet utilization while the voice remains strong
Demands for capacities will be huge while the needs for integrating all sets of services at one management and control will increase.
- Increase of connected number and types of devices
Web connected devices will increase. PCs, mobiles, TVs, game devices, etc. There will be a need to standardize the applications to all these set of devices.
6.2 Electronic communications industry analysis
We will use the M. Porter's “Five forces model” for analyzing the industry. We selected this model as being already one of the most worldwide known, widely recognized and used model for industry analysis. The analysis done based on that model will be used for business strategy development recommendations.
The following graphs show the sector revenue growth and market in 2008 compared to the other countries in the region.
Source: (Cullen Report, 2010)
Source: (Cullen Report, 2010)
In May 1996, AMC a state owned company by this time launched for the first time in Albania the GSM services becoming one of the first countries in the region to offer such services. Currently there are three companies operating in the mobile services market AMC, Vodafone and Eagle Mobile. The fourth operator is licensed and is expected to launch the services on July 2010.
On July 2009, the mobile customers were at 3.52 millions, mobile service penetration was at 110% of the population, and more than 99% of population and 90% of territory is covered by GSM signal. Around 93.8% of customers are prepaid and 6.2% are postpaid. AMC has 43.30% of customer base, Vodafone AL 43.00% and Eagle 13.7 % (Cullen, 2010). Technology used is 2G EDGE while 3G spectrum is expected to be licensed by mid 2010. Main services offered in the market are voice, SMS, MMS, WAP, internet access and GPRS intranets.
43.3% of market share is owed by AMC, 43% by Vodafone and 13.4% by Eagle Mobile.
Albtelecom is the incumbent fixed operator in the market while more than 70 alternative operators operate mainly in the rural zones.
Number of fixed telephony users by July 2009 end was 360,000 which represents 11.3% penetration while alternative operators customers are at 49, 690 representing 14% of this number(Cullen, 2010). 99.92 % of the fixed telephony is digitized. In July 2009 the numbers of PSTN lines were at 359,100, ISDN lines at 929, lines given to residential customers were at 338,300 and to business customers at 21,700 (Cullen, 2010).
Leased lines and Data services
Albtelecom and the three mobile operators are the providers of leased lines services at national and international access. Albtelecom has had the monopoly of such services until few years ago and kept it for international access until 2006. Albtelecom has implemented a few fiber lines connecting some main cities while internationally have access of fiber backbones to Italy and to Greece and other Adriatic see countries through the Adria fiber backbone.
The mobile operators have not build yet a backbone to be used for leasing yet but are offering for the moment free capacities of their backbone build for their core business, mobile services. Besides AMC, there are not any clear evidences and data on the leased lines or data services provided by the other two mobile operators (Vodafone and Eagle Mobile). Albtelecom and mobile operators are moving forward their plans for implementation of a national Fiber backbone which will serve future needs for capacities nationally or for international access.
AMC has provided data internetworking services to banks and other business or government institutions. More than 200 local networks of xxx customers are internetworked nationally and xxxx connections to international networks are established.
Use Cullen report data on lease lines (pages 53-67, here are prices only)
Broadband and Internet Services
These services are offered for the moment by fixed operators while the mobile broadband services are not yet licensed by regulatory authority. Broadband penetration rate was at 2.51 % on January 2010 and was the lowest one in the region while EU penetration was at 23.9% (Cullen, 2010).
About 36 ISPs are operating in Albania mainly providing the services in Tirana area and few in the other western cities. According to Cullen report, by January 2010, the number of broadband connections was 80,000, narrowband connections were at 28,512 and 30% of people are regularly using the Internet (Cullen, 2010). Number of internet users in 2008, including the mobile internet access users, was at 580,000. Main operators are Albtelecom, Abisnet, ABCOM, Alfa cable and ASC (AKEP, 2010). 65% of broadband market is owned by Albtelecom and 35% by the alternative operators. Broadband technology used is ADSL and HFC.
The following table shows the internet penetration progress over the years.
Source: (Internet world statistics, 2010)
Albtelecom offers upstream capacities of internet access to retail customers from 512Kbps to 4Mbps while Abisnet from 1 to 3 Mbps.
Albtelecom is the main operator offering to other ISP-s high capacity access to internet international gateway through fiber. Other alternative operators access the international gateways through Albtelecom use other alternative microwave links. The internet backbone access capacity in October 2009 was 5.5GB and was one of the lowest in the region.
The threat for substitute product and services
AMC offers Data Internetworking and Internet services through ISP in addition to its core business mobile services. International IP transit services are provided through the partnership established with OTEGlobe which is an international data services provider. The type of service is IP transit, (Layer3 Networking) where turnkey IP network is provided through delivering the end routers, installation and configurations of them and IP packet encryption as well. IP capacities provided are dedicated. Availability of services is above 99.9% and quality of network is very good.
For such type of data services, substitute services in the market are considered the MPLS VPN-s, satellite data links, internet VPN services, GPRS Intranets and data dial-up.
MPLS VPNs are becoming standard services worldwide but not yet present in the local market. This comes mainly due to the reasons of lack of a dedicated data backbone in the country, the lack of development of IP backbones technologies by the operators for the moment and the lack of fiber backbones. Since the data IP backbone is missing for the moment and establishing it will need time and big investments, MPLS VPNs may present a substitution threat after some years. There are not operators offering such products for the moment.
Satellite data links are established through satellite terminals installed at the local remote offices locations. Links are aggregated to the satellite nub and then connected to the headquarter network. These links have the advantage of installing anywhere in the country and this represent an advantage considering the terrain but are more convenient to be used as point to point links rather than in a distributed multipoint topology. The links availability is influenced much by the weather.
Internet VPN services are considered good for point to point services connections rather than multipoint simultaneous network connections that business applications usually need to establish. However for banks which usually operate mainly in a star topology where the affiliates are connected and transmit data to headquarter; the VPN may be considered as a good substitute of AMC data services. Internet VPNs provided capacities are variable and depending from the load of communications in the internet while business applications are very sensitive to the bandwidth required in a dedicated mode over the time. Also, in order to establish Internet VPNs the access to the internet is needed and in the case of Albania where the internet access in other cities other than the main ones is missing or is difficult, the VPN solutions will need the connection to the headquarter internet access anyway
GPRS intranets provide a private IP network established through the mobile network. With EDGE technology available in the country, the connection capacity can reach max 240kbps while the average is at around 100kbps but it is variable of voice and data traffic in the cell.
Dial-up connection provide instant connection to headquarter data centers from affiliates located remotely but the capacity of connection is low and not proper for many type of business applications. The stability and reliability of fixed dialup lines are low and the price of such connections are still considerable. In addition the penetration of fixed telephony in Albania is low, less than 10% so the possibility of access of a dial up line is low.
With regards to the cost, satellite links are expensive as regard to monthly fee and usually of limited capacities. GPRS and Dial-up lines may be considered not as a real substitute but as an alternative for backup data transmission media in case the primary network is unavailable.
Regarding the switching cost of the substitute products, we may say that there is a risk that customers may switch to other cheap solution for the savings purposes only. Switching to internet VPN solutions maybe considered as a real risk. The risk is increased based on the fact that the difference in price is high because internet access is cheap although the quality provided is not guaranteed and is based on best effort. VPN connections are cheap and are established using existing internet access of the headquarter premises but establishing remote affiliate connections to the headquarter premises by dedicated channels will require significant investments almost equal to the price of services provided by AMC. To establish the VPN though accessing the internet locally in the city will require local loop access to possible local ISPs in the city which is at around 30Euro and is considered cheap but availability of ISPs in the local cities is low. Switching cost to Satellite links is very high. It includes the setup costs, costs of the terminals and costs of the hub establishment. Switching to satellite data lines really is not an option except for the case that there is not any other meaning of access for specific remote locations.
AMC offers these services to Business customers bundled with mobile services so there is not much risks for substitution since customers will evaluate all the packet of services offered and not only one. Business customers, who received the bundled services at a more attractive price by AMC, will not be willing to change the vendor for data services substitution alone.
ISP services offered by AMC are the standard ones offered by an ISP: e-mail hosting, DNS hosting, Web pages hosting, FTP and telnet. There is not any direct substitute for such services in the market while other ISPs are offering the same ones. The only risk in this aspect is the bundling of such services by other services provided in a package of triple services which include Internet, Voice and Video. These kind of bundled services target the consumer market and not really the business segment. The price of such bundled offers cannot be directly compared with the standard internet service since they are not same one while on the other hand, AMC bundles these services for the business customers with other mobile services. Although they are not same bundled services provided to the customers, there is a trend to integrate the fixed and mobile services provided to the business customers by mobile operators. Compared with the fixed operators, ISPs are already ahead as regard to offering triple services to the consumers through broadband wire line access while the fixed operators are focused on offering for the moment traditional voice and Internet access through broadband cables.
(CONFIRM WITH INTERVIEWS, ENTER REFERENCES FROM INTERVIEW) (COMPLETE IT BYCURRENT SIMILAR SERVICES BY COMPETITORS IN THE MARKET)
The threat of entry of new competitors (CONFIRM WITH INTERVIEWS)
ENTER REFERENCES FROM INTERVIEW)
The law of Electronic Communications which came into force on June 2006 introduced a general authorization regime based on which networks and services which do not require the use of limited resources to be established and operate can start the operation without any individual license. These services can be provided by just notifying the regulatory authority (AKEP) which in turn provides the registration only. Individual authorization is provided for the right of use of spectrum and numbers.
ISP and data services belong to the first category and can be provided just by notifying the authority, while in case of use of frequencies for transmission; authorization should be provided by the Regulatory.
This low has facilitated a lot the electronic market access in Albania, promoting competition in this market.
Regulatory authority has designated AMC and Vodafone as Significant Market Power (SMP) regulating tariffs for voice termination and mobile retail tariffs while Albtelecom is designated as SMP in six markets of fixed telephony. This mechanism helps the new entrants to establish better interconnection tariffs with big operators and with AMC as one of them as well.
The lack of national backbone to the other providers makes possible to them to offer services limited to territory of few main cities of Albania but not national ones.
However, attempts are seen lately from different ISPs and other operators to build a shared national backbone but these are not materialized yet.
The lack of national data backbone which might be operated by an independent entity, presents a barrier to other operators which may want to offer data services nationally while tha lack of regulation in the leased lines market makes not possible for them to get cheap leased lines from the other operators such as AMC, Vodafone or Albtelecom which are players in the data services market.
As regard to Products differentiation, we may point out that similar data services are provided by other competitors however most of type of service offered by them are Leased Lines provided point to point in territory of Albania and connections are provided among operators' premises buildings so not including the local loop segment to the customer. Other small players have offered cheap networking services where Layer 2 networking is provided to the customers. There is provided only one Layer2 network with no encryption applied in the links while all customers connected are transmitting in the same Ethernet domain. Network availability and performance is low. Other ISPs are not providing data services; mainly they are providing Internet access services while lately triple play services are introduced where Internet, telephone and video are offered through same network of fiber combined with cable.
AMC has a well established, well known well positioned brand. It has been dominating the mobile market since 14 years by customer base and services provided. It has proven already to be an operator which form many years is offering not only mobile services but also high quality data and internet services to business customers. Its brand represents a big advantage to any other new entrant in the market.
The AMC's customers have reasons to remain loyal to the provider of Mobile, Data services as there is proven the quality and reliability of services since long time of operations. On the other hand, AMC provide incentives in Data and ISP services provided when bundled with mobile services. However, AMC is providing high quality services but at a higher cost compared with other competitors prices and that can damage the loyalty factor. New entrant who may offer attractive prices will risk the current data and ISP services of AMC.
The investments to establish a new national data or ISP service provider are high. The cost for establishment of new central infrastructure is not that high while the main cost belongs to the establishment of access network and backbone. In the access the cost will be high not only for the cables to be established but because in some main cities the canals for cables pass do not exist or are not adequate. The cost to build the national backbone is very high and cannot be done by ISP-s unless a big investor enters the data backbone market. Based on the above two factors, new market entrants will be limited for many years to offer the services in regional zones unless regulation of leased lines market is done by the regulatory authorities. Indeed, there is already a public consultation process run by AKEP which intend to retrieve the operators opinion on rules to be applied for regulating the tariffs of leased lines which in case is finalized and applied, will increase the threat of new entrants in the national data and ISP services provided.
There is not any distribution channel really serving the Data and Internet Services in Albania. AMC has four distributor channels for selling its mobile services to consumers while the direct sale force is used for selling the data and ISP services to business.
Since the services are offered to businesses only for the moment and not to consumers, there has not been a need for a distribution channel.
Most of the distributors are serving exclusively for the moment different operators therefore, in case AMC provides ISP services to consumers, the access of new possible entrants to these distribution channels might be forbidden making difficult for them the access to these distribution channels.
AMC is a well established and experienced organization. It is doing successfully business in Albania since 14 years, has a very experienced and skilled personnel therefore during the time the new entrant will be established, be experienced with the business and the market will face difficulties competing with such an operator in the market.
Government policies are focused on the development of the market through competition and promotion of FDIs, protection of the consumer and development of the latest technology. These policies have helped the market liberalization and are set in compliance with the EU recommendations and WTO obligations. Although the framework and policies set by the Government are in compliance with the above principles, the realizations of them in practice have been slow and sometimes not sufficient. The lack of political stability, wide spread corruption in the administration and lack of efficiency in institutions have been the main factors for the delays in implementation. The main gap has been identified in the failure to apply in practice the Government policies for developing new technologies. Government and regulatory entity (AKEP) has failed for several years to license the spectrum for broadband 3G and WiMAX technologies although these systems have been operational since many years in Europe. Because of these delays on licensing, the data and Internet service providers have been forbidden to use an adequate wireless system for access of the customer in last mile. Under the condition of an under-developed wire line access facilities in Albania this deficiency has forced the service providers to use other inefficient and expensive solutions for accessing the end customer in the last mile which at the end has caused the increase of the price for the services delivered to them.
In case these technologies will be offered now, Wireless systems will represent a big opportunity to the new entrants to access the customer in the last mile through an efficient and advanced wireless system, with lower cost per unit of customer and unit of capacity offered.
The intensity of competitive rivalry (CONFIRM WITH INTERVIEWS
ENTER REFERENCES FROM INTERVIEW)
(CHECK WHETHER IS BETTER TO PUT TO COMPETITION SECTION)
The three mobile operators offer currently almost same mobile technology and mobile services but we have to note that AMC has been always ahead to the other operators by implementing new services such as GPRS, EDGE, USSD, WAP, e-Bill, Balance check, e.t.c. Vodafone and Eagle have offered the Fixed Lock to Cell services but for the moment its market is not considerable. In addition it is considered as a competitive advantage to AMC the fact of offering the additional Data and ISP services to the business customers only although the second one is not much developed. Bundling such services to the mobile has been considered as a component of reducing the mobile services prices as well letting possible to AMC to sustain and reply to the lower mobile voice prices offered during the last year by the new entrant Eagle Mobile.
On the contrary, considered as a standalone service, while Data services are progressed better than competitors, the ISP services have not been developed and AMC has faced already the pressure in the market from the competitors.
As regard to services quality, AMC has sustained a constant network service quality by having high KPIs on availability (99.93%), lower call drop rates, lower blocking rate, etc.
Customer support services and operations activities are considered by the company and customers as a competitive advantage. Since the services of Data and ISP-s are supported by the same network backbone and high engineering personnel, the quality of them has joined the same standards applied for mobile services.
Lately, some of the ISP-s have entered the fixed telephony market which is offered with VoIP technology bundled in the triple offers of Voice, Internet and Video accessed through the broadband. Although the triple services offer is limited to some areas in the country and is considered still expensive, in a meaning of tomorrow's integrated services it represents a very serious move which will risk the business of other operators as well.
The bargaining power of customers (Buyers) (CONFIRM WITH INTERVIEWS, ENTER REFERENCES FROM INTERVIEW)
Currently in the market are three mobile operators offering almost same mobile services in the market, many ISP-s offering the Internet services and very lately triple services such as Internet, VoIP and Video. New substitute products exist for individual services taken separately but there are scare offers as regard to combined integrated services: Voice, data, internet, Video. Business customers have different offers in the market for mobile services but they do not have many choices for Data services while the options of ISP services are many.
For both customers segments, Business and Consumers there is not yet offered the number portability option but it is going to be available by the end of the year with low costs and short time of switching and will represent a big risk but also opportunity for the two big mobile operators.
National roaming is not yet offered in the country.
Business customers are well informed by the sales force of all the operators about the availability of offers.
There is a differentiation of products in the market for AMC since it is offering combined Mobile, Data and Internet services to business customers.
The bargaining power of suppliers
Suppliers offer to AMC network equipments, services for implementation and support for maintenance and operations of the network. NSN is the main supplier for the network technology and for point to point microwave links while Alcatel for the Backbone SDH links. Horizon is the local supplier for CISCO routers and SUN ISP servers.
There is a big degree of dependence from NSN and Alcatel as the only current vendor for the network and transmission. The switching cost is very high and time for swapping is long. Therefore the bargaining power of these two suppliers is very high. However, since AMC is part of Cosmote Group which has already introduced Ericsson and Huawei in other Cosmote group operators decreasing the power of NSN as a supplier in the group.
The cost of switching the point to point microwave links could be high but since they can be used for other purposes in the GSM network, the investment is not lost.
Regarding the SUN servers and CISCO routers and switches, there are many vendors providing these type of equipments rather than Horizon. However, the cost of switching may be considered high. In addition, the presence in the market of Linux based ISP solutions which are of low cost, is a good opportunity for AMC to swap while the vendor power is significantly minimized.
7. Competitive environmental analysis (CONFIRM WITH INTERVIEWS)
We will analyze the competition split in four different categories of services offered: Mobile services, Data Networking Services, Competitors for ISP Services and at the end the competition for combined Integrated Services.
This is based on the fact that the services AMC offers for the moment are offered by different Vendors but none of them is offering them all and similar as AMC is offering:
Mobile services (SEE CULLEN REPORT, confirm by interviews)
Vodafone Albania has launched is services by xxxx 2001 breaking the monopoly of AMC in the mobile market by this time. MARKET SHARE? Vodafone is a worldwide well known brand therefore the Vodafone Albania is enjoining in the market the benefits of such brand positioning. Vodafone Al is focused on quality business customers and youth segment. Services offered are standard GSM ones: Mobile Voice, SMS, Data, MMS, WAP portals, Lock to Cell. Vodafone Karta and Vodafone Club are two of the main product group offered(SUPPORT by INTERVIEW)
The MARKET SHARE?, STRATEGY
Eagle Mobile launched the GSM services on March 2008 and now it has 600,000 subscribers owing 15% of the market share. It covers 97% of population and 90.7 of territory. Technology implemented is GSM EDGE and services offered are Mobile Voice, SMS, MMS, Internet, WAP portal, Mobile TV streaming over EDGE, Lock to Cell, Fleet management. Entering the market in 2008 and supported by the fixed telephony operator is under same ownership with Eagle, it started a price war with other operators. Customers followed some of their offers but as the penetration were low and the off-net prices were high, this step caused customers to keep 2 or three numbers, one per each network calling.
Eagle mobile has position its brand initially as a National brand and currently as offering cheap services while has been constantly working on improving the network coverage and quality of services delivered.
It is not offering fixed Data networking or ISP services as these services are offered by the fixed operator Albtelecom which.
Data Networking Services
Albtelecom is offering national leased lines services, TDM trunks in the backbone and cooper lines in the last mile access. Trunks technology is TDM circuits and transmission media is mostly microwaves and fiber in main cities. The circuit is provided up to the end points of Albtelecom premises and not for the local loop connections.
Historically this operator has positioned itself as a monopoly, high price and low quality provider. Dial up services are offered through the fixed lines but the speed is low as the quality of copper lines is not good.
During 2009 EBITDA was at 49.42%, ROCE 3.9%, number of employees at around 2,200.
TRING is offering fiber optics leased circuits in Tirana area only.
Entering lately this market, there is not much information on the offers provided by them. The MARKET SHARE? STRATEGY
PRIMO/BIND is offering Layer 2 Ethernet access networking using Albtelecom circuits as bearer. It is positioned as low price low quality and low security provider. End to end application encryption is needed in case of security sensitive applications.
The MARKET SHARE???, STRATEGY
Mobile Operators (Vodafone & Eagle Mobile)
AbCom has started the ISP operations in Albania in 1998. Product offered are mail, DNS and web pages hosting, Internet access, Voice and Video (3N1) and the territory covered are limited to western main cities of Albania. Access technology used is through broadband modems, wireless WiFi and dial-up. There are not clear statistics on number of customers or territory coverage of AbCom.
PRIMO (Albania online) has started offering the ISP services in 1999. Services offered are email, web and DNS hosting, Internet Access, VoIP voice. Broadband ADSL modems are used for access while a fiber backbone (AFB) is established in Tirana area. There are not clear statistics on number of customers or territory coverage of PRIMO.
Abisnet is another ISP operating in Albania. It has established the operations in ?????. It is using standard ISP services and VoIP as well. Access is offered through ADSL, ADSL2+ and WiFi hotspots. There are not clear statistics on number of customers or territory coverage of Abisnet.
Integrated services (Fixed and Mobile, Voice & Data and Video)
8. AMC's offered services
The core business of AMC is offering of GSM Mobile Services in Albania. Main standard mobile services offered are Voice, SMS, MMS, Voice Mail, Mobile Internet access, WAP portal, and Roaming. Services are offered to 2 main customer segments: business and residential. Other GSM based services such as virtual PABX, GPRS Intranets, WEB to SMS, Electronic Bill, Closed User Groups are offered as well to business customers.
Voice Interconnection and SMS interworking are offered to national or international fix and mobile interconnect partners.
Considering the opportunities in Albanian market, four years ago AMC tried to diversify by investing and offering the fixed data and internet services to its business customers. Fixed data services represent IP data transit services provided to customers which need to interconnect IP networks located to different locations in Albania or all over the world while Internet services represent standard services offered by ISPs such as Internet Access, E-mail, DNS and Web pages hosting. Considered as fixed type of services, these were are offered to business customers only combined with the basic mobile services such as Mobile Voice, SMS, MMS and Mobile Internet and other GSM corporate services such as Virtual PABX and GPRS Intranets. The purpose was to enrich the services portfolio offered in the market by including additional services that other competitors were not offering. For residential customers the service of Internet access is offered through mobile GSM infrastructure only.
Data Inter-networking Services
IP inter-networking services are offered to business customers. Customers' headquarter, main and remote offices networks are nationally or internationally inter-networked together in order to make possible for the customer's corporate users to run and use the business applications locally or remotely. Users are distributed all over the country or worldwide in case of multinational companies but are usually served by same centralized servers located in the headquarter.
Capacities offered vary from 128Kbs to nx2Mbits and are provided as dedicated in the local and backbone segments of the network.
When required by the customers, channel IPSec encryption is offered and applied by AMC at the network level, otherwise, the customer should take care on its own for the security applied end to end at application level.
Installation and setup of routers, transmitters and other network element is provided by AMC. Network operation and maintenance is provided 7days / 24 hours by AMC.
Service is provided based on agreed SLA in which high level of KPIs are defined. Services order is done through dedicated business sales channel.
Invoicing is done manually through the SAP system FI module based on monthly fees applied to the customer for the service. No integration with the Billing system exists (LHS BSCS) therefore there is not a common invoice generated for the customer for mobile and fixed services, instead separate invoice is generated for each service.
Standard ISP services such as Internet access, DNS hosting, e-mail hosting and Web pages hosting are offered to business customers. In addition, Web pages design, development and maintenance is also offered.
Email ISP server hosts and manages all the data and logic of the customer's email domain and mailboxes. Two modes of access are possible for the customer for administration, access and use of the emails:
1. A small virtual POP server is installed in the client premises network and each user accesses his email box configured and stored in that virtual server. User accounts are setup and configured by the company IT administrator in the virtual server. One virtual user which identifies the entire domain hosted for the customer is configured in the central ISP server. Emails for all users configured in the virtual server are online or periodically replicated to the virtual server users' mail boxes.
2. All customer users are created in the central ISP server by the Customer IT administrator which remotely accesses the server through Internet or through any meaning of direct access. Users access the mailboxes through internet interface. In such a case the customer needs to install nothing in its premises so this solution is considered a more cost effective solution
Maintenance and operations of central ISP infrastructure, transmission links and IP connectivity is provided by AMC.
Internet access capacities offered vary from 256Kbs to nX2Mbps.
SW licensing is based on fixed amount per user. Prices are based on the principle of monthly flat fee per user for the email and flat fee for the internet services which is variable of channel capacity provided. Setup fee includes part of investments and services cost for the setup, installations and last mile access of customer to the ISP platform.
Backbone Internet access is provided by OteGlobe and access speed 10Mbs but is variable to number of customers connected which for the moment is very low.
Services activation for ISP services is done through back office from the technical team manually.
9. Implemented technology
Data Services Technology
Layer 3 IP internetworking services are provided to the customers, while Frame Relay protocol and circuits are used in the data link layer. Communication architecture used is mostly the star one and Frame Relay hub & spoke topology is used for the circuits.
Ethernet interfaces are provided to the customer's premises at the end access points making possible for them to just plug in the Ethernet cable and internetwork.
CISCO equipments are used for IP routing and Frame Relay circuits switching.
Multiple E1 TDM links are used in the national transmission backbone build of Alcatel SDH microwave links in ring topology or point to point super PDH microwave links. Point to point microwave PDH links are used currently for any local access loop connection whatever the location of the customer is: headquarter, main office or remote small one while very rarely DSL modems over local Albtelecom cooper links are established. For about 2 years and until 2007, a wireless point to multipoint system was used (Intracom IAS-W) operating at 3.5 GHz but it was uninstalled since the regulatory authority wanted to free this spectrum in order to be used for broadband wireless access technologies. Redundant paths are applied in the transmission backbone through SDH rings but not in the local loop or in IP network (routing) level. Capacities are dedicated for each customer in the backbone and in the local loop access.
IP routing backbone is not implemented therefore star topology and architecture is implemented to access the remote cities. After some years of operation and with the increase of number of customers the today's architecture sounds more like a ‘Spaghetti” one leading to many discussions on the lack of efficiency on using the transmission capacities. Long time discussions on the change of the technology and architecture have taken place but yet there is not any final decision on the technology, architecture to follow and investments needed.
SUN UNIX based servers are used for the email, Web and DNS services. I-Planet mail server software is used. SUN Web Proxy server is used for internet access control, SUN Web server for Web pages and SUN Active Directory SW for authentication and configurations. Virtual email servers are used and installed in the customer premises.
CISCO routers are used for the IP networking in the ISP central infrastructure and in the customer premises.
Microwave TDM links are used for the last mile access of the customer at capacities of multiple 2Mbps although for the remote offices the capacities required by the customers is low and at the rates of 256kbps. Installation of such links with high capacities (usually 4x2Mbps) is done for the reason that this is the minimum capacity offered by the MW links supplier for the moment.
Similar to data services mentioned above: GSM backbone transmission network is used for the transmission. SDH and Super PDH links are used in the backbone transmission. Redundant paths are applied in the transmission backbone through SDH rings but not in the local loop or in IP routing level. Capacities are dedicated for each customer in the backbone and in the local loop access. IP routing backbone is not implemented therefore star topology and architecture is used to access the remote cities.
(Enter a diagram of the ISP architecture and solution….)
10. Services Development Process
11. Organizational units supporting the Data & ISP services business
12. Business Financial data (Investments, revenues, for Data & ISP services)
13. SWOT analysis
14. Findings presentation and analysis/discussions
POLITICAL: As a conclusion, we may say that Albania is a relatively politically stable country and has made o lot of progresses in developing the market economy and society. Albania has a very good legislation which is compliant with EU directives the Government has established good policies on developing the Electronic communication sector and the proper institutions are in place for the regulation of the market but for all the above mentioned factors we can say that there is a gap between the presence of laws, policies frameworks and procedures and the reality of implementing them in practice.
Albania is progressing ahead with the adoption of new technologies for electronic communications although in few aspects this progress is slow.
This service is suffering from: the lack of last mile access which is mainly offered by the incumbent operator and is old and limited in the cities areas; low capacities in the national and backbone infrastructure
According to the Interviews held with AMC P&S and Sales managers, main services required for the moment from business are Data networking services for connecting and networking their remote branch, Internet access, e-mail hosting, DNS hosting and Web pages hosting, Internet VPN-s for remote and mobile application access, Mobile Telephony, Fixed telephony PBX, Mobile Intranets. These services are required bundled, available for each branch of the company (PUT IN INTERVIEWS)
There is not any statistics for Residential Data market and demands but indicators and the interviews with the business people in AMC show that this market is very limited while is an evident market and demands for Internet access and email services. (PUT IN INTERVIEWS)
(SEE THE POSIBILITY TO PUT TO FINDINGS)
15. Overall business related findings
16. Product development findings
17. Technology roadmap findings
18. Organizational and processes related findings
20. Commercial Strategy for product development and marketing
21. Technology selection and roadmap
22. Organizational changes
23. Changes implementation action plan
25. Summary & Conclusions