Moldova boasts a good choice of broadband offers – provided you live in the capital

Posted by Lucy Berridge Friday, April 10th, 2009

Add a comment

The incumbent Moldtelecoms’ reluctance to give rivals access to its local loops has driven its competitors roll out their own fiber networks in Chisinau. Increased competition combined with tariff cuts of around 50% last year is fuelling subscriber growth and creating a competitive broadband environment in the capital.

Alternative fiber providers include StarNet, Seti, Danisnet and Datacom. Moldtelecom began rolling out fiber quite aggressively last year in response and by end-December 2008 had gained a 4.6% broadband market share with its fiber-to-the-building/Ethernet offer.

Seti has introduced a digital TV service and is also competing head-on with Moldova’s leading cable provider Sun Communications. The incumbent is trialing a limited IPTV offer.

Moldtelecom is putting fiber in its underground duct network but is blocking its rivals’ requests for access to its ducts. The alternative operators have reached agreement with the electricity company to use its poles, so most of their deployments are aerial.

The increasing competition is positive for a market where broadband household penetration has yet to reach double figures, but the picture is very different outside the capital. Just one-third of all broadband subscribers are outside Chisinau, according to telecoms regulator ANRCETI, and many of these are in Moldova’s second city Balti.

The regulator cites a number of reasons for the dearth of broadband subscribers outside these two cities. Alternative infrastructure is minimal, in part because of the difficulties operators have encountered when trying to offer unbundled services. Purchasing power is low, and many in rural areas lack computer skills. But observers say nearly every village has at least one telecenter providing Internet access, and the government subsidizes broadband for schools. The Ministry of Information Development is planning to publish a broadband-development strategy “in the nearest future,” ANRCETI says.
However the main barrier to broadband take up, according to operators and ANRCETI, is Moldtelecom’s monopoly on international bandwidth: It is the only operator with a connection to the European backbone network.

This situation keeps prices for international bandwidth inflated and can cause traffic bottlenecks, though pricing rather than congestion is the greater problem for Moldova’s operators at present. Providers advertise far higher speeds for surfing domestic sites than international ones. But at least two other providers are capable of connecting to the European backbone network, they have just not been given permission to do so, say insiders.
Regulatory conditions should become increasingly favorable for the alternative operators. ANRCETI intends to take a tougher stance on LLU and will request that the incumbent introduce a bitstream-based DSL offer. Moldova wants to become a member of the European Union and so will have to bring its regulation in line with the EU’s.

The planned partial privatization of Moldtelecom will affect growth in the broadband sector, and the state will be less able to protect its interests through favorable regulation. But a foreign investor is likely to make the incumbent more agile and quick to respond to market demands. Moldtelecom’s foot-dragging over access to its infrastructure is what drove the alternative operators to deploy their own fiber networks. They have created a competitive environment in the capital, and because they are smaller and privately owned, they are nimbler and can adapt more quickly to market demand than the incumbent.

Privatization may not be imminent, however as there have already been several failed attempts since 1998. Moldova’s general election on April 5 was won by the ruling Communist party but the outcome - the Communists only just secured enough votes to remain in power - sparked protests, initally peaceful, then turning violent. Given that it will have to come to some arrangement to work with the opposition parties, and return the country to peace, the new government is unlikely to have Moldtelecom’s privatization at the top of its agenda for the next few months.

The government wants to retain a stake in Moldtelecom so it does not lose all the income from what is now its most profitable asset. It is also determined not to relinquish total control of the incumbent’s infrastructure. Striking a deal that will suit the government and potential investors may prove difficult.

Another problem is that the government wants EURO1 billion (US$1.3 billion) for Moldtelecom, but observers say EURO200-300 million is a more realistic valuation, especially given current economic conditions. Deutsche Telekom is said to have been among those interested during the government’s latest attempt at a sale last year. The German operator already has a sizeable fixed and mobile portfolio in south-east Europe. This includes an indirect holding in Romtelecom, the incumbent in neighboring Romania, through its stake in Romtelecom’s majority shareholder OTE.

The telecoms sector has no restrictions on foreign ownership but foreign investment in the fixed sector has been limited to date. Sun Communications is an exception as it is majority owned by US investors. There are a number of international investors in the mobile sector including Orange and the TeliaSonera/Turkcell joint venture Fintur Holding. Cyprus-based Eventis Telecom Holding is thought to be selling its 51% stake in Moldova’s Eventis Mobile. Tele2, T-Mobile and a Russian operator have reportedly expressed interest.

Even if there are no immediate ownership changes at Moldtelecom, consolidation looks likely among smaller operators as it seems unlikely the market can sustain the 42 ISPs that ANRCETI says are offering broadband services.