Incumbency and market share within European mobile telecommunication networks

Telecommunications Policy 36 (2012) 222–236

Contents lists available at SciVerse ScienceDirect

Telecommunications Policy URL: www.elsevier.com/locate/telpol

Incumbency and market share within European mobile telecommunication networks Jason Whalley n, Peter Curwen Department of Management Science, University of Strathclyde, Glasgow, UK

a r t i c l e in f o

abstract

Available online 12 December 2011

The structure of mobile telecommunication markets varies considerably across Europe, ranging from monopolies with a handful of subscribers to markets with five operators and many millions of subscribers. Where competitive markets occur, there is also an incumbent operator possessing substantial first mover advantages. This paper explores these advantages, asking whether the incumbent has remained the largest operator as the market has developed. This question is investigated using data from 49 European countries. The analysis finds that in most countries the incumbent continues to be the largest operator measured by market share. In some countries, later entrants into the market have struggled to gain market share, contributing to the highly concentrated nature of many mobile markets. The extent to which the geographical footprint of an operator influences its market share is also examined. & 2011 Elsevier Ltd. All rights reserved.

Keywords: EU Mobile Telecommunications Incumbent First mover advantages

1. Introduction Throughout the world, most countries have liberalised their telecommunications markets. As a result, competition has been introduced into markets with all that this entails. As a consequence of this competition, new technologies and services have been developed, prices have fallen and mobile telecommunications have reached an ever-larger share of the population. Although these benefits have been, and remain, significant, the development of competition in mobile markets has taken longer than many expected, with the first operator to launch often retaining a significant portion of the market long after it has been joined by two or three other operators. While there are several reasons why incumbents have continued to dominate mobile markets, it has been argued that they posses significant first-mover advantages that later entrants have found difficult to overturn (Bijwaard, Janssen, & Maasland, 2008; Whalley & Curwen, 2006). Given these advantages and the well-documented difficulties that some later entrants have experienced, an interesting question to ask is in how many markets is the incumbent still the largest mobile telecommunication operator? In contrast to previous research that has relied on a small sample size (for example, Bijwaard et al., 2008) or sought to explain developments within a single country (for example, Liu, Chou, Wu, & Shih, 2009), this article asks whether the incumbent mobile operator is still the largest across 49 countries in a broadly defined Europe. With this in mind, the remainder of this article is structured as follows. In the following section, the relevant literature in two areas is discussed. The first of these areas identifies the advantages associated with being a first-mover in general, whereas the second examines previous research relating to first-mover advantages within the telecommunications

n

Corresponding author. Tel.: þ 44 141 548 4546. E-mail addresses: [email protected], [email protected] (J. Whalley).

0308-5961/$ - see front matter & 2011 Elsevier Ltd. All rights reserved. doi:10.1016/j.telpol.2011.11.020

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236

223

industry. In Section 3, the sample and methodology adopted is outlined while in Section 4 the analysis is undertaken. The analysis is divided into two parts, covering firstly whether incumbents have remained the largest operator in their respective markets and, secondly, whether it is possible to discern any market share benefits from operating in contiguous markets. Conclusions are drawn in Section 5, and areas for future research are suggested. 2. Literature review This section presents the relevant literature in two areas. In the first sub-section, the focus is on first-mover advantages with the literature drawing on a range of markets. By drawing on a broad array of literature, this first sub-section highlights the scope of first-mover advantages that have been observed and the difficulties encountered by later entrants into various markets. In the second sub-section, the focus switches to the telecommunications industry. After differentiating between the two different categories of first-mover that are observable within the telecommunications industry, the remainder of the sub-section recounts the relevant literature. This literature addresses the timing of entry, highlighting the challenges that later entrants encounter in mobile telecommunication markets. 2.1. First-mover advantages The advantages that arise from being the first into a particular market have been discussed in the literature—see, for example, Kerin, Varadrajan, and Peterson (1992), Lieberman and Montgomery (1988, 1998), Urban, Carter, Gaskin, and Mucha (1986) and Stickel (2001). Lieberman and Montgomery (1988, p. 41f) identified three different types of first-mover advantages: technological leadership, pre-emption of assets and buyer switching costs. With regard to technological leadership, they identified two different types of first-mover advantage. One advantage was based on the learning that occurred over time, while the second was based on the research and development (R&D) that companies undertook. As companies learned how to produce their products more efficiently or to use feedback from the market to enhance these products, barriers to entry were created that sustained the competitiveness of the first-mover. This competitiveness could also be sustained through the use of patented technology, although this was largely determined by the extent to which a company had engaged in R&D. Interestingly, Lieberman and Montgomery (1988) drew attention to patent races and the reasons why these were not winner takes all occurrences and were limited to just a handful of industries. In practice, patents could be circumvented and provided only temporary advantages due to the pace of technological change. Another set of first-mover advantages arose from the ability of one company to acquire scarce assets before its rivals. As a result of being better informed than its rivals, the first-mover could acquire natural resources or property before its rivals (Lieberman & Montgomery, 1988, p. 44). First-movers might also be able to squeeze out their rivals by targeting the most profitable parts of the market in terms either of geography or market niche. If the products were similar, later entrants could also be deterred from entering market niches by the threat of price competition. Market entry might also be deterred where the first-mover pre-emptively invested in plant and equipment, with the resulting larger productive capacity then being used to enable it to compete on price. Stickel (2001) also drew attention to the importance of information, albeit within the context of a duopoly with homogenous products. The better informed company could determine whether first-mover advantages existed, and thus whether or not to invest in the market. Switching costs and buyer uncertainty also provide companies with first-mover advantages. Lieberman and Montgomery (1988, p. 46) identified a broad range of switching costs, with their presence requiring subsequent entrants to invest additional resources in order to attract customers away from the first-mover. In contrast, in attempting to overcome brand loyalty, later entrants needed either to possess a superior product or to advertise more frequently or creatively than the first-mover. Drawing on several studies, Kerin et al. (1992) identified a range of first-mover advantages that were similar to those suggested by Lieberman and Montgomery (1988). However, they questioned the extent to which these were achievable in practice. For example, they suggested that there were cost and differentiation advantages associated with being the firstmover but that these depended on the first-mover’s management making the appropriate investment decisions. If the first-mover needed to invest in equipment to gain the advantage, but was unlikely to do so in the face of uncertainty over future demand, this uncertainty might prevent the first-mover’s management from making the appropriate investment, thereby denying the company its first-mover advantages. Another reservation expressed by Kerin et al. (1992) was the extent to which the first-mover’s cost advantage was influenced by whether it had engaged in related or unrelated diversification. If the first-mover had engaged in related diversification it would enjoy economies of scope, which it would not do if it had engaged in unrelated diversification. In other words, there were cost advantages associated with related diversification. While Kerin et al. (1992, p. 45) argued that proprietary technological innovations did provide first-movers with an enduring competitive advantage, they went on to state that this was not the case for other innovation sources. Moreover, major changes in technology might work against first-movers burdened with large investments in old technologies. Drawing on consumer product data from the United States, Urban et al. (1986) investigated whether market share benefits accrue from being first into a market. They found that although the market share of the pioneering brand does decline as other brands enter the market, there are still market share benefits associated with being first into the market.

224

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236

Interestingly they found that as the number of entrants increased, the penalty associated with later entry into the market declines as market shares are increasingly determined by advertising and positioning (Urban et al., 1986, p. 655). One aspect of positioning is product features, while another is price. Later entrants can gain market share by competing on features and/or price, while the pioneering brand can defend its position by developing appropriate strategies in one or both of these areas. Brown and Lattin (1986) extended the analysis undertaken by Urban et al. (1986) by including data relating to the regional rollout of brands within a single product category. They found that a brand lost market share to a rival through not following it swiftly into regional markets (Brown & Lattin, 1986, p. 1367). Moreover, while their analysis does suggest that the lagging brand is able to recover partially the lost market share, this is a slow process. In turn, Huff and Robinson (1994) draw on Brown and Lattin (1986) and Urban et al. (1986) in their analysis of the impact that lead-time and competitive rivalry have on market share. They found that whether new entrants were able to overturn the market share advantages of the first company to enter the market was partly determined by the age of the market. In older markets, the lead-time enjoyed by the first entrant was substantially larger than in younger markets. Furthermore, in older markets the market share of second entrants was found to have caught up with, but not surpassed, the pioneering company (Huff & Robinson, 1994, p. 1376). The market share of the third and fourth entrants reflected the relative ordering of entry into the market. In contrast, in younger markets, the market share of the second entrant had not caught up that of the pioneering company. Whereas Kerin et al. (1992) questioned the extent to which first-mover advantages exist, other authors have chosen to highlight the existence of first-mover disadvantages. For example, later entrants will benefit from the market-making efforts of the first-mover in terms both of creating the market as well as resolving technological uncertainties (Lieberman & Montgomery, 1988, p. 47). New entrants may exploit technological changes as they compete against the first-mover but, by drawing on Scherer (1980) and Lieberman and Montgomery (1988) suggested that this was not as one-sided as was implied given that there were examples of first-movers proving themselves to be aggressive followers of technological change. In other words, the incumbent waited until the later entrants demonstrated the viability of the technology before aggressively adopting the technology itself. The first-mover might also suffer from inertia (Lieberman & Montgomery, 1988): it might suffer from asset specificity or be reluctant to cannibalise its existing product and revenue sources. Inertia might also arise due to the first-mover’s organisational structure as well as the inability of its management to identify and assess the challenges that it faced. Managerial issues were also touched on in the Gannon, Smith, and Grimm (1992) discussion of first-mover activity within the domestic US airline industry. They found that those airlines engaging in first-mover activities were led by better educated but less experienced senior management than those that did not. The extent to which first-mover advantages exist is one of the issues that were discussed in Methe´’s (1992) study of the dynamic random access market (DRAM) segment of the integrated circuit market. He found that first-mover advantages were enjoyed within each DRAM product innovation but not between the innovations, with each new innovation offering a window of opportunity to those lagging behind in the industry to make up ground on the market leaders. Indeed, many of the large companies that emerged in the industry were unable to maintain their position as innovators from one generation of products to the next. As a consequence, it was not necessarily the case that the first entrant into the market remained the innovator. Coeurderoy and Durand (2004) explored the relationship between what they described as early mover advantage and the company’s market share. Early movers were innovators that create the rules of the game for subsequent entrants, and as such included more companies than just the first one in their analysis to enter the market. They drew on a sample of just over 1000 French manufacturing companies in seven industries to ascertain the advantages that companies gained from being early movers. Based on their analysis of the seven industries investigated, they suggested that entry order did influence market share, with earlier entry being associated with higher market share. In summary, there are clear and substantial advantages associated with being first into a market. Through developing the market, the pioneering company is able to strengthen its competitive position so that it continues to be the largest company measured by market share even after several other companies have entered the market. For later entrants to be able to match, and perhaps surpass, the market share of the pioneer, their products will need contain more features and/or be cheaper than those of the first company to enter the market. 2.2. Telecommunications Within the telecommunications industry, it is possible to distinguish between two categories of first-mover. One category is fixed-wire, where operators normally started life in public ownership, and the second is mobile where operators were licensed from the mid-1980s onwards and were frequently owned by the fixed-wire incumbent. The term ‘incumbent’ can be used in relation to both categories of first-mover although the precise meaning of the term is not identical. The strategies of both fixed-wire and mobile incumbents have been extensively researched. A considerable proportion of this research has examined incumbent strategies within the context of liberalisation and the development of competition (see, for example, Bohlin & Granstrand, 1994; Eliassen & Sjøvaag, 1999; Johnson & Turner, 2007). In respect of coverage of other issues, the detailed case studies of operators, both fixed-wire and mobile, in Curwen and Whalley (2004) are unusual, with a more typical approach being that of Stienstra, Baaij, van den Bosch, and Volberda (2004) or Turner (2005).

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236

225

The latter both explore the strategies of incumbent European operators that operate in fixed and mobile telecommunication markets. In contrast, Bijwaard et al. (2008) focused on mobile incumbents when analysing early mover advantages in 16 countries. They found that early entry into a market was better than later entry, and that it was more difficult to enter a concentrated market. As a result, later entrants often found it difficult to increase their market share when competing against well-entrenched rivals. They suggested that those governments intending to create a level playing field between operators needed to give careful consideration to the timing of licence issue to new entrants. Although Ferna´ndez and Usero (2009) did not explicitly examine mobile incumbents, their conclusion that pioneers and followers should follow different strategies was implicit within the analysis of Bijwaard et al. (2008). Liu et al. (2009) examined the changes that had occurred in the Taiwanese mobile sector. Over a period of five years, Chunghwa Telecom, the incumbent operator, had ceded the leadership of the market to Taiwan Cellular. Their analysis highlighted how the incumbent’s ability to compete against its rival was limited by regulatory and budgetary constraints. While the regulatory restraints were to be expected, the role played by budgetary constraints was unusual. As the incumbent was state-owned, it was subject to Taiwan’s Budget law which required it to present details of its own budget a year in advance and which limited what it could do. As a result, the ability of the incumbent to respond freely to market competition was lost. For example, Chunghwa Telecom could not offer free handsets with the consequence that it was unable to attract new subscribers and hence lost market share. Several countries have sought to increase competition in mobile markets by issuing third-generation (3G) licences in excess of the number of second-generation (2G) incumbents. However, this has proved difficult to deliver. Whalley and Curwen (2006) outlined the difficulties experienced by Sonera, Telefo´nica and France Te´le´com/Orange as they attempted to expand into new markets through 3G licensing. Only Hutchison Whampoa, which trades as 3, has emerged as a significant 3G-based new entrant in Europe. Funded by the extensive resources of the parent company, Hutchison Whampoa’s subsidiaries have been able to enter a handful of countries although they remain relatively small players in these markets (Curwen & Whalley, 2010). This small subscriber base limits Hutchison Whampoa’s ability to achieve scale economies, and it is further disadvantaged by the contradictory pressures of handset subsidies and the need to compete via low prices. Given the challenges of growing a mobile subscriber base from scratch in the face of competition from 2G incumbents, it is perhaps no surprise that Hutchison Whampoa has been able neither to float its various operations as planned nor exit from one or more of its markets, either through a merger or closure of its operations. Finally, Atiyas and Dogan (2007) charted the development of competition in the Turkish mobile market. Their analysis suggested that the timing of entry was important, with significant first-mover advantages being observed. These advantages accrued from the wider geographical coverage of the initial operator as well as its larger subscriber base, both of which tended to increase while awaiting the entry of the second operator into the market. If the second operator entered the market several years after the first, the advantages that accrued were such that it found it very difficult to compete effectively for subscribers. Naturally, one way to offset these advantages would be to develop and then implement an appropriate regulatory framework. As noted by the authors, not only would such a framework tend to be quite diverse, covering a range of issues such as interconnection, roaming and number portability, but it would also be difficult to implement. From the aforementioned literature, there would appear to be clear first-mover advantages within mobile telecommunication markets. The literature shows that, in many cases, later entrants into mobile markets have struggled to gain market share, with the case of Taiwan being unusual as the incumbent was limited in its competitive responses by a unique set of circumstances. With this in mind, it is possible to suggest the following research question that will be addressed in the remainder of the paper: RQ1—have incumbent mobile operators remained the largest company by market share? As noted above, Brown and Lattin (1986) found that a brand lost market share to a rival if it did not swiftly follow it into other regional markets. Drawing on this, it is possible to suggest a second research question that reflects the advantages that are said to accrue from operating in contiguous markets, namely: RQ 2—has the entry of mobile operators into contiguous markets helped them retain market share?

3. Data ¨ From Dorrenbacher (2000), Curwen and Whalley (2006) and Gerpott and Jakopin (2005) it is possible to identify a range ¨ of different measures through which the performance of mobile operators could be assessed. Dorrenbacher (2000) suggested turnover and operating income, while Curwen and Whalley (2006) identified the number of subscribers and countries in which the mobile operator is present as appropriate measures of internationalisation. Through adopting these two measures, they were able to include 38 companies in their analysis. In contrast, only 14 European companies were included in the analysis of Gerpott and Jakopin (2005) due to their use of a financial measure of internationalisation in their analysis. Moreover, while Gerpott and Jakopin (2005) included a seven-year run of data (1997–2003) a much longer timeframe can be found in Bijwaard et al. (2008), namely from 1990 to 2006.

226

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236

The differences in scope that are evident between Bijwaard et al. (2008), Curwen and Whalley (2006) and Gerpott and Jakopin (2005) reflect the problem that mobile operators do not provide a consistent amount of operational and financial information. Some operators provide detailed information that enables the operational and financial performance of individual operations to be ascertained, while others consolidate their operations together by region or according to the extent of their equity holding. As a consequence, there is an inevitable tension between coverage and detail—to include more companies or countries within the analysis requires compromises to be made regarding which variables are to be included and the granularity of the data. Such a compromise can be found within this article. As a consequence of the desire to include a wider range of countries and mobile operators than Bijwaard et al. (2008) or Gerpott and Jakopin (2005) in the analysis of the relationship between first-mover advantages and market share, financial data are not included. Moreover, by including a longer timeframe it is possible to observe the impact that 3G has had on market share. Like Bijwaard et al. (2008), Fuentelsaz, Maı´cas, and Polo (2008) and Wu and Chu (2010), market share (subscriber) data is used in the analysis. Before how the data was collected is outlined, it is necessary to note that it has been implicitly assumed that mobile operators seek to maximise their subscriber base and thus, in turn, their share of the market within a particular country. It is, however, conceivable that an operator may make the strategic decision to focus on one particular customer type over another, or alternatively to maximise revenues or returns rather than subscriber numbers. In the UK, for example, it is arguably the case that Vodafone initially favoured business over residential consumers while the opposite was true for One-2-One (which subsequently became T-Mobile and then Everything Everywhere). A case can also be made out that the strategic focus of both of these operators has changed over the years, such that they no longer favour one part of the market over another. While such anecdotal arguments exist regarding the strategic choices made by operators, information collected in a systematic fashion for all of the operators in the sample, over the timeframe covered by the mobile subscriber (market share) data, is not available. The data for this paper are drawn from a variety of sources. The starting point is Global Mobile, which publishes mobile subscriber figures on a quarterly and annual basis arranged by operator. It also provides information on the technology used by each operator as well as the date that it launched each service. The data provided are comprehensive, covering 49 countries across a broadly defined Europe, and are available over a lengthy run of years. In this article, Europe is defined as encompassing the European Union (EU) and European Free Trade Area (EFTA) along with those countries having some form of independent government within a post-Communist understanding of Europe. Russia has been excluded because so much of its land is located outside Europe and it has many regional operators, which is not the norm elsewhere in Europe, while Kosovo has been excluded as some EU member states do not accept its independent status (Curwen & Whalley, 2008). As a consequence of the manner in which Global Mobile presents its data, it is possible to identify almost 500 entries across the 49 countries in the sample. Most of these are duplicate entries due to changes in the name of operators or differences in one of the variables – number of subscribers, date of launch and technology use – that are reported. By comparing Global Mobile with Curwen and Whalley (2004, 2008), which summarised the same data collected independently by the authors, duplicate entries were removed with the consequence that the number of entries declined to just over 320. As the use of a specific technology by a specific operator in a specific country was treated as an independent entry, an individual operator frequently ended up with multiple entries within one country. Accordingly, the data were further consolidated so that one entry per operator in each country was reported. This resulted in 175 mobile operators being identified across the countries included in the analysis. This was further reduced to 168 by the exclusion of those operators using CDMA technology as they are not directly comparable with the vast majority of operators that use GSM as their second-generation technology and W-CDMA (otherwise known as UMTS) as their third-generation technology. It is worth noting that in Europe, CDMA is frequently provided in the 450 MHz band, which is never used for GSM, and that roaming is extremely limited so subscriber numbers tend to be low. The comparison of data collected by Curwen and Whalley – which are continually updated and as an annual datum currently covers the period to end-2010 – and that by Global Mobile brought to light significant discrepancies regarding the dates on which mobile operators launched their services. Initially, Global Mobile reported licensing dates, but subsequently switched to launch dates while neglecting to define the exact meaning of a launch. In contrast, Curwen and Whalley (2008) defined a launch as the date when services were first made available either to business users or the public, with the consequence that their dates were often different from those cited by Global Mobile. It should also be noted that since some of the operators contained in Global Mobile have subscriber numbers combined across two technologies, analogue (1G) and 2G, whereas Curwen and Whalley (2008) do not take account of 1G launch dates, neither source provides comprehensive and reliable coverage of launch dates across all three generations of mobile technologies. In essence, Curwen and Whalley (2008) data are more internally consistent and reliable (although it has to be said that the definition of a launch date remains controversial), but they no longer see any useful purpose in separating out 1G, even retrospectively, while Global Mobile data are more comprehensive but less reliable. To ensure maximum coverage, Curwen and Whalley data are used for 2G and 3G launch dates, and Global Mobile for 1G. 4. Analysis This section will focus on two issues that arise from the literature review in Section 2. The first of these is whether the advantages that accrued to the mobile incumbent as first-mover were such that it remained as the largest operator by

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236

227

market share at the end of 2009. The second issue is whether there are advantages associated with mobile operators creating footprints of contiguous investments. 4.1. Incumbents and first-movers The starting point of the analysis is Table 1. For each of the countries in the sample, the table identifies the fixed-wire and mobile incumbents as well as the other mobile operators at the end of 2010. The first observation that can be made is that competition was present in all but four of the 49 countries in the sample. Of the 45 countries where there was more than one operator, 32 countries had either two or three active operators. In contrast, there were 14 countries with four or more mobile operators. That there were four operators in Germany is unsurprising given its population of around 80 million. What may be surprising is that Austria, a country with a much smaller population of roughly eight million, also had four operators. There were also four operators in Liechtenstein, a country with a population of just 35,000, although in this case its geographical position had encouraged network extension from neighbouring countries given that the investments involved were relatively modest. Both the Ukraine and the United Kingdom had five operators at the end of 2009, although in the latter case this subsequently declined with the merger of T-Mobile and Orange (to become Everything Everywhere). After several months of speculation, Deutsche Telekom announced that it had agreed to merge its UK operations with those of Orange (Deutsche Telekom, 2009). This merger, which was completed in early 2010 (Mobile News Direct, 2010), reduced the number of operators from five to four. It is worth noting, however, that the newly merged company is somewhat larger than O2 (Telefo´nica) or Vodafone and many times larger than Hutchison (branded as ‘3’). The Ukrainian market is also in the process of consolidation although, as per usual, the process has ended up in the law courts (TeleGeography, 2010). There were also five operators in The Netherlands as recently as 2004, but since then consolidation has reduced the number of operators to three. In April 2003, the then mmO2 was sold to Greenfield Capital Partners who in turn subsequently sold the company to KPN in June 2005 (Curwen & Whalley, 2004; Greenfield Capital Partners, 2005). Partly due to its strategy of focusing on markets where it was the first- or second-largest operator, Orange sold its Dutch operations to T-Mobile for h1.3 billion in 2007 (Deutsche Telekom, 2007). Thus, as of mid-2011, only Ukraine retained more than four active operators, which varied considerably in size from less than two million subscribers at the end of 2010 to more than 24 million. The second observation that can be made is that for 31 countries the first mobile operator to launch is currently owned by the fixed-wire incumbent. A related observation is that in 32 countries the incumbent mobile operator is currently the largest operator in terms of subscribers. Within a large number of these countries, 22 in all, the largest operator has advanced through at least three successive generations of mobile technologies. This would appear to reinforce the argument that there are significant advantages from being the first-mover in a market. However, a closer examination of the market shares of operators is revealing. In Germany, for example, the gap between the incumbent operator, T-Mobile, and the second-largest operator has fluctuated over the years. For all but four years of the period under study, T-Mobile, the incumbent, has been the largest operator in the market. Unusually, in 1998, the market share of T-Mobile and Vodafone was the same, though in the subsequent two years Vodafone managed to edge ahead of T-Mobile to become the largest operator. Since 2000 the market position of these two operators has been reversed with just one exception, namely 2004. Since then, T-Mobile has been the largest operator with a margin over Vodafone that appears to be widening over time. In Italy the incumbent, Telecom Italia, has always been the largest operator. In 1997 Telecom Italia was more than twice as large as its only rival, Vodafone. This margin has declined as other operators have entered the market and the penetration rate has increased. From a peak in 2007, the number of subscribers controlled by Telecom Italia has steadily declined, thereby reducing its margin over Vodafone, the second-placed operator. Interestingly, the number of subscribers controlled by Hutchison (branded as ‘3’) also appears to have peaked in 2007. As a result of these various changes Telecom Italia is currently the largest operator, closely followed by Vodafone with Wind – which effectively became bankrupt and recently changed hands – steadily losing ground. For its part, ‘3’ is much smaller than Wind and hence it is a minor player in the Italian market. In Macedonia, T-Mobile has been the largest operator throughout the period under investigation. Cosmofon, now owned by Telekom Slovenije, was the second operator to launch in 2003, and Telekom Austria (branded as ‘Vip’) the third in 2007. The launch of the third operator does not appear to have affected T-Mobile’s ability to attract new subscribers given that it has generated subscriber growth every year since Telekom Austria entered the market (although the yearly subscriber increases are admittedly lower than was previously the case). Instead, Telekom Austria appears to be growing at the expense of Cosmofon, which saw its subscriber base decline between 2008 and 2009 by an amount equal to the entire subscriber base of the third-placed operator. A similar story of a third entrant into the market affecting the second entrant more than the incumbent can also be observed in Malta, where the incumbent (Vodafone) has continued to grow while Mobisle, the second-placed operator, has lost subscribers. In several countries there is a significant size gap between the largest (the incumbent) and the second-largest operator. One such country is Spain, while another is Sweden. In the case of Sweden, the incumbent TeliaSonera is roughly equal in size to Tele2, the second-placed, and Telenor, the third-placed operator, combined. In Switzerland, Swisscom, the incumbent, is much larger than TDC and Orange combined. In other words, the Swiss market is skewed in favour of the

228

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236

Table 1 European telecommunication operators, 31 December 2010. Source: Compiled by the authors from a variety of sources. Country

Operator Fixed-wire incumbent

Mobile operator(s) launched prior to 31/12/2010 and using GSMa Incumbent operator(s)b

Other operator(s)

Rank order of mobile operators by number mobile subscribers on 31/12/2009, from largest to smallest.

Albania Andorra Austria

Albania Telecom Andorra Telecom Telekom Austria

AMC (OTE) Andorra Telecomc Telekom Austriac

Eagle Mobilec, Vodafone – Hutchison (3G), ONE, T-Mobile

Belgium BosniaHerzegovina Bulgaria Croatia

Belgacom BH Telecom

Belgacomc GSM BiHc

KPN, Orange HT MK, Mobilna Srpske

AMC4Vodafone 4Eagle Mobile – Telekom Austria4T-Mobile 4ONE4 Hutchison (3G) Belgacom4Orange 4KPN GSM BiH 4Mobilna Srpske 4HT MK

Vivacom T-Hrvatski Telekomikacijie CyTA Cesky´ Telecom TDC

Telekom Austria T-Mobilec

OTE, Vivacomc Tele2, Telekom Austria

Telekom Austria4OTE 4Vivacom T-Mobile4Telekom Austria 4Tele2

CyTAc Telefo´nicac TDCc

CyTA 4MTN T-Mobile4Telefo´nica4Vodafone TDC4 Telenor4 TeliaSonera 4Hutchison (3G)

TeliaSonerac Føroya Telecomc TeliaSonerac Orangec TeliaSonera

Germany Gibraltar Greece Greenland Guernsey Hungary Icelandg Ireland

Eesti Telefon Føroya Telecom TeliaSonera France Te´le´com JSC United Georgian Telecommunications Deutsche Telekom Gibraltar Telecom OTE TeleGreenland Guernsey Telecom Mata´v Siminn Eircom

MTN T-Mobile, Vodafone Hutchison (3G), Telenor, TeliaSonera Elisa, Tele2 Kall-GSM DNA, Elisa Bouygues Te´le´com, SFR Magti, VimpelCom

T-Mobilec Gibraltar Telecomc Wind TeleGreenlandc C&Wc T-Mobilec Siminnc Vodafone

Isle of Man Italy

Manx Telecom Telecom Italia

HgCapital/CPSc,i Telecom Italiac

Jersey Latvia Liechtenstein

Jersey Telecomc TeliaSonerac TeleNet

Malta Moldova

Jersey Telecom Lattelekom Telecom Liechtenstein Lietuvos Telekomas P&T Luxembourg Makedonski Telekomunikacii Maltacom Moldtelecom

Monaco Montenegro Netherlands Norwayj Polandk

Monaco Telecom Crnogorski Telekom KPN Telenor TPSA

Monaco Telecomc Telenor KPNc Telenorc Orangec

Portugal Romania Serbia Slovakia

Portugal Telecom RomTelecom Telekom Srbija Slovenske´ Telekomunika´cie Telekom Slovenije

Cyprusd Czech Rep. Denmark Estoniae Faroe Islands Finland France Georgiaf

Lithuania Luxembourg Macedonia

Slovenia Spain Sweden Switzerland Turkey

Telefo´nica TeliaSonera Swisscom ¨ Telekom Turk

TeliaSonera 4Tele24Elisa Føroya Telecom4 Kall-GSM Elisa 4TeliaSonera 4DNA Orange4SFR 4Bouygues Te´le´com TeliaSonera 4Magti4VimpelCom T-Mobile4Vodafone 4KPN 4Telefo´nica – OTE 4Vodafone4Wind – C&W4Wave Telecom4Bharti Airtel T-Mobile4Telenor 4 Vodafone Siminn4Vodafone 4Nova (3G) Vodafone4Telefo´nica4eircom4Hutchison (3G) HgCapital/CPS 4C&W4Wire9 Telecom Italia 4Vodafone4Weather 4Hutchison (3G) Jersey Telecom4Bharti Airtel 4C&W Tele24TeliaSonera 4Bite´ Belgacom4Orange 4Telekom Austria4TeleNet TeliaSonera 4Tele24Bite´ LuXcomms4Belgacom4 P&T Luxembourg T-Mobile4Telekom Slovenije 4Telekom Austria Vodafone4Mobisle 4Melita Mobile (3G) Orange4Moldcell 4Eventis 4Moldtelecom (3G) – T-Mobile4Telenor 4 M:tel KPN 4T-Mobile4 Vodafone Telenor 4TeliaSonera 4Mobile Norway Vodafone4Orange 4PTC4Netia P4l

Portugal Telecomc Vodafone Telenor T-Mobilec

KPN, Telefo´nica, Vodafone – OTEc, Vodafone – Bharti Airtel, Wave Telecom Telenor, Vodafone Nova (3G), Vodafoneh eircomc, Hutchison (3G), Telefo´nica C&W, Wire9 Hutchison (3G), Vodafone, Weather Bharti Airtel, C&W Bite´, Tele2 Belgacom, Orange, Telekom Austria Bite´, Tele2 Belgacom, P&T Luxembourg Telekom Austria, Telekom Slovenije Melita Mobile (3G), Mobislec Eventis, Moldcell, Moldtelecom (3G)c – M:tel, T-Mobilec T-Mobile, Vodafone Mobile Norway, TeliaSonera Aero2, CenterNet, Mobyland, Netia P4, PTC, Vodafone Vodafone, Optimus Orange, OTEc, RCS&RDS Telekom Austria, Telekom Srbijac Orange, Telefo´nica

Telekom Slovenijec

Telekom Austria, Tus, T-2 (3G)

Telekom Austria4Telekom Slovenije 4Tus 4T2 (3G) Telefo´nica4 Vodafone4Orange 4TeliaSonera (3G) TeliaSonera 4Tele24Telenor 4Hutchison (3G) Swisscom 4CVC Capital Partners 4Orange Turkcell4Vodafone 4Avea

TeliaSonerac LuXcommsc T-Mobilec Vodafone Orange

c

Telefo´nica

TeliaSonera Swisscomc Turkcell

c

Orange, Vodafone, TeliaSonera (3G) Hutchison (3G), Tele2, Telenor Orange, CVC Capital Partners Aveac, Vodafone

Portugal Telecom4Vodafone 4Optimus Orange4Vodafone 4OTE 4RCS&RDS Telekom Srbija4Telenor 4Telekom Austria Orange4T-Mobile 4Telefo´nica

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236

229

Table 1 (continued ) Country

Operator Fixed-wire incumbent

Mobile operator(s) launched prior to 31/12/2010 and using GSMa Incumbent operator(s)b

UK

BT

Ukraine

Ukrtelecom

Rank order of mobile operators by number mobile subscribers on 31/12/2009, from largest to smallest.

Other operator(s)

Telefo´nica, Vodafone Hutchison (3G), Orange, T-Mobile Telefo´nica4T-Mobile 4Vodafone4Orange 4 Hutchison (3G) MTS Astelit, Kyivstar, Ukrtelecom Kyivstar 4MTS 4Astelit4VimpelCom 4 c (3G) , VimpelCom Ukrtelecom (3G)

a Mobile operators – which all have national licences – are identified in accordance with a methodology unique to the research conducted by Curwen and Whalley. The purpose is to make it as easy as possible for readers to identify common parentage of networks where the parent controls its subsidiaries. In the case of national incumbents, the name used is either that of the parent, such as Telenor or TeliaSonera, or that of the brand used across all of its networks, such as T-Mobile (rather than Deutsche Telekom) or Orange (rather than France Te´le´com) where the association of parent and brand is common knowledge. However, if the brand is used where the parent is very much a minority shareholder (as in the case of Orange in Austria) and the major shareholder is not a telco, the network name is used to signify lack of parental control. In some cases, such as ‘3’, which is the brand used everywhere in Europe by ultimate holding company Hutchison Whampoa, the parent’s name is preferred because ‘3’ is nowhere a 2G incumbent. In yet other cases, usually in small countries/islands, neither the parent’s name nor the brand will be familiar and the parent’s name is used for consistency. Although less than perfect, this methodology is much clearer than that used elsewhere. b First operator to launch in markets with two or more operators present. c Part of the same group as fixed incumbent. d There are two operators listed based in South Cyprus. In addition, in North Cyprus, are to be found Kibris Telekomvia and KKTCell, but these are treated as regional subsidiaries of parents Telsim and Turkcell respectively. e 3G new entrant Bravocom had not yet launched. f 3G new entrant Telecom Invest had not yet launched. Aquafon and A-Mobile operate only in the disputed Abkhazia region. g IMC Iceland is operational but only serves a niche market. Amitelo and IceCell had not yet launched. h Although Vodafone does not hold an equity stake in Vodafone-Iceland, the company was rebranded from Og-Vodafone to Vodafone-Iceland in October 2006 by its then owners. The company is now owned by Teymi, an Icelandic IT company but is universally reported in the media as Vodafone which is accordingly preferred here (as an exception). i Manx Telecom was sold by Telefo´nica to HgCapital/CPS in June 2010. j MTU T3 and Hutchison (3G) had not yet launched. k Tele Kolejowa had not yet launched. l At the end of 2009, Aero2, CenterNet and Mobyland had not yet launched their operations.

incumbent. A lopsided market can also be observed in Turkey, where Turkcell (the incumbent) has around six million more subscribers than the other two operators (Vodafone and Avea) combined. It is also the case that, for 13 countries in 2009, the incumbent operator was no longer the largest operator. In Bulgaria and Lithuania, for example, the incumbent operators’ services were based only on first-generation (1G) mobile technology—that is, they did not subsequently introduce second- or third-generation technologies. As such, their relative position in the market declined over time as later operators began to deliver their services using 2G. As they did not introduce 2G-based services, they eventually exited the marketplace. Liechtenstein is unusual in that the later entrants dominate the market place, with the incumbent being the smallest of the four operators that are present in the country. In a handful of countries the gap between the incumbent and the largest operator is quite small. In Latvia, for example, the gap between LMT (incumbent) and Tele2 (largest operator) was just 40,000 subscribers at the end of 2010. Similarly, the gap in Romania between Vodafone (incumbent) and Orange (largest operator) and in Poland between Orange (incumbent) and Plus (largest operator) is relatively small in relation to the absolute size of these two operators. In contrast, the gap between the incumbent and largest operator in some countries is relatively large. In Serbia the incumbent is Telenor, while Telekom Srbija is the largest operator. Telekom Srbija is almost twice as large as Telenor, which in turn is twice as large as Telekom Austria (branded as ‘Vip’). In Slovakia, the gap between T-Mobile (incumbent) and Orange (largest) is almost equivalent to the subscriber base of the third operator, Telefo´nica. As a direct consequence of liberalisation, the market share of incumbents has invariably fallen. Fig. 1 charts the market share of incumbent operators at the end of 2009. Fig. 1 indicates clearly that, in the majority of the 45 countries in the sample where competition has been introduced, the incumbent’s share of the market is now below 50%. However, this is slightly misleading since, in 17 of the 33 countries where the incumbent controls less than half of the market, its market share is located somewhere in the 40–50% range. In other words, the incumbent controls just under half of the market. Given the distribution evident in Fig. 1, it is arguably the case that the norm for incumbent market share after several years of liberalisation lies between 30% and 60%. Depending on the nature of the liberalisation process and the degree of competition, the loss of market share for some incumbents has been sharp and swift while for others it has been slow and protracted. Illustrative examples of this decline are shown in Fig. 2. As can be observed, Vodafone in the UK has gradually lost market share throughout the period under study, but this comes as no surprise when it is remembered that by 1994 there were already four second-generation (2G)

230

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236

18 16 14 12 10 8 6 4 2 0 0s

10s

20s

30s

40s

50s

60s

70s

80s

90s

Fig. 1. Distribution of incumbents by market share, 31 December 2009. Source: Compiled by the authors from a variety of sources.

Fig. 2. Illustrative examples of declining market share, 1990–2009.

operators in the market. In contrast, a sharper decline in market share is observable in Ukraine where MTS rapidly lost market share as other operators entered the market. It is worthy of note, given that this phenomenon can be observed in many other countries, that although its market share declined its subscriber base simultaneously grew as the penetration rate and hence the overall size of the market increased. A handful of incumbents have been able to reverse their decline and regain market share. In all, it is possible to identify seven incumbents that have managed this feat, although a closer examination of their market share trend suggests that the total may be rather smaller. In Austria, Telekom Austria has begun to regain market share from a low point in 2006, although the handful of years that has since passed and the subsequent fluctuation in its market share suggests that it may too early to tell whether or not its reversal of fortune is permanent or not. A degree of caution is also required in two other cases, T-Mobile in Croatia and C&W in Guernsey. While both of these incumbents have begun to regain market share, too few years have passed to say whether or not this change is permanent. 4.2. Contiguous markets and market share Clear differences exist across the 49 countries of the sample. Roughly one-half of the countries in the sample are members of the EU, while others are hoping to join, and a few are members of the European Free Trade Association. It is no surprise, therefore, that differences also exist across the sample when it comes to the international investment strategies of mobile operators. Curwen and Whalley (2008) showed that the internationalisation focus of operators, as demonstrated by the number of subscribers and investments held, varied considerably at the end of 2007. Some operators such as France Te´le´com could be described as bipolar when the location of their investments was taken into account. Although the company had made investments around the globe, more than half of its investments could be found in two regions, namely Western Europe and Africa. In contrast, two-thirds of France Te´le´com’s proportionate subscribers originated in Western Europe. That some operators had implemented a regional focus to their internationalisation strategies is one of the conclusions that could be drawn from this research.

Country

Hungary Austria Czech Rep. Croatia UK Macedonia Netherlands Bosnia-Herzegovina Poland Montenegro Slovakia

T-Mobile invested in

1993 1995 1996 1999 1999 2001 2002 2003 2003 2005 2005

Year 1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

– – – – – – – – – – –

– – – – – – – – – – –

– – – – – – – – – – –

100 – – – – – – – – – –

80 – – – – – – – – – –

73 0 – – – – – – – – –

64 2 17 – – – – – – – –

63 19 33 – – – – – – – –

60 35 39 – – – – – – – –

58 35 45 62 – – – – – – –

53 34 43 55 21 – – – – – –

51 33 41 51 23 100 – – – – –

51 30 41 53 25 100 12 – – – –

48 28 40 51 26 86 15 13 36 – –

46 25 41 53 24 76 15 13 37 – –

45 34 40 56 23 69 14 14 35 47 44

44 34 41 48 24 67 16 16 33 42 45

45 33 40 47 24 62 28 19 31 33 40

44 32 40 46 22 58 28 20 30 41 41

44 31 40 47 22 66 28 22 30 37 41

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236

Table 2 Market share of T-Mobile across Europe, 1990–2009. Source: Compiled by the authors from a variety of sources.

231

232

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236

The regional focus of some mobile operators echoed Whalley and Curwen (2005) who examined the fragmentation of the mobile sector within Europe. They found that regional strategies had been implemented by TeliaSonera and Tele2, while the investments of Hutchison Whampoa, which operates across Europe using the ‘3’ brand name, were deliberately in a broad array of countries. In contrast, the investments of mmO2 – which subsequently became O2 prior to being acquired by Telefo´nica – and Orange were scattered across Europe due to a multitude of circumstances. In addition to TeliaSonera noted above, Table 3 would suggest that several other operators have adopted such a strategy. The investment footprints of three operators – T-Mobile, OTE and Telekom Austria – continue to favour Central and Eastern Europe and the Balkans. The scattering of investments across a multitude of countries, either through choice or circumstance, negates the benefits that may be derived from being present in contiguous markets. One such benefit would be the internalisation of roaming traffic as customers move across borders, while another would be increased brand recognition (assuming that the same brand is used in different markets). A third benefit could be shared marketing efforts. Given the advantages associated with an operator being present in contiguous markets, one question to ask is whether such a strategy has been enacted and, if it has, whether it is possible to identify the benefits that accrue from such a strategy. Fig. 3 presents the European footprint of T-Mobile. These investments are both directly and indirectly held (but do not include those held via OTE). The market share of T-Mobile in these countries ranges from just over 20% in the case of the Bosnia-Herzegovina and the UK to more than 60% in Macedonia, though its market share in most countries falls somewhere between 30% and 50%. However, this sheds little light on whether the creation of a contiguous footprint has enhanced T-Mobile’s market share. With the notable exception of the UK, at the end of December 2009 T-Mobile was either the largest (Bosnia-Herzegovina, Croatia, Czech Republic, Hungary, Macedonia) or second-largest operator (Austria, Montenegro, Slovakia) by market share, although it was almost exactly the same size as the third-largest operator in Poland. Since all of the markets in which T-Mobile is present are competitive and its market share has inevitably changed over time, the market position noted above may be due to competitive pressures or the creation of a contiguous footprint over a number of years. Table 2 presents the market share of T-Mobile in those European countries outside of its home market where it was present at the end of 2010. Drawing on this table it is possible to identify several types of market: Hungary, The Netherlands and Poland are examples of countries where the market share of T-Mobile appears to have stabilised in recent years, while Austria and the UK illustrate countries where it continues to decline, albeit slowly. While these stabilised or slowly declining market shares arguably reflect the competitive pressures faced by T-Mobile in these markets, it is not clear what the contribution of a contiguous footprint has been. It could be argued that T-Mobile’s investments in Bosnia-Herzegovina and Slovakia both benefited from its earlier investments in neighbouring countries. In BosniaHerzegovina, T-Mobile has steadily increased its market share so that by the end of 2010 it controlled 30% of the market while in Slovakia, its declining market share has been arrested. As noted above, Deutsche Telekom owned a 30% stake in OTE at the end of 2010 (which it has been forced to increase via an option to 40% in June 2011). The direct and indirect investments of OTE are focused in the Balkans, and thus geographically complement, and in two cases replicate, the footprint of T-Mobile. Where there is no overlap, OTE is the largest operator by market share in three countries (Albania, Greece and Serbia) and the second-largest operator in Bulgaria. OTE was the third-largest operator in Romania at the end of 2010. Where there is an overlap between the two

Fig. 3. European footprint of T-Mobile, 31 December 2010.

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236

233

operators, through OTE’s 20% stake in Telekom Srbija, these investments occupy a lower market position than those of T-Mobile. One possible explanation for the differences in market position between T-Mobile and OTE is that the former has adopted a more consistent branding strategy than the latter. With the exception of Poland and Bosnia, all of its mobile operations are branded as T-Mobile. In contrast, Cosmote is used in Greece and Romania, AMC in Albania and Globul in Bulgaria. The mobile businesses of Telekom Srbija are also branded differently. The use of multiple brands would negate any benefits that might occur from heightened brand recognition as consumers roam. It is worth noting that the rebranding of RomTelecom in 2005 to Cosmote corresponded to the start of its growth. Another operator that uses multiple brands across its international footprint is Telekom Austria. As can be observed from Table 3, the international investments of Telekom Austria can be divided geographically into two groups, centred respectively on Austria and the Balkans. In the former group, different brands have been adopted in Austria and Liechtenstein Table 3 Operator footprints,a 1 July 2011. Source: Compiled by the authors from a variety of sources Country

Vodafone

Albania Andorra Austria Belgium Bosnia-Herzegovina Bulgaria Croatia Cyprusb Czech Republic Denmark Estonia Faroe Islands Finland France Georgia Germany Gibraltar Greece Greenland Guernsey Hungary Iceland Ireland Isle of Man Italy Jersey Latvia Liechtenstein Lithuania Luxembourg Macedonia Malta Moldova Monaco Montenegro Netherlands Norway Poland Portugal Romania Serbia Slovakia Slovenia Spain Sweden Switzerland Turkey UK Ukraine

Yes

a b

Vodafone partner agreements

T-Mobile

OTE

TeliaSonera

Telekom Austria

Yes Yes Yes

Yes Yes

Yes Yes Yes Yes

Yes Yes Yes

Yes Yes

Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes

Yes

Yes

Yes

Yes Yes

Yes

Yes Yes

Yes Yes Yes Yes

Yes Yes

Yes Yes Yes

Yes Yes

Yes

Yes Yes Yes Yes

Yes

Yes

Yes Yes Yes Yes

Yes Yes Yes Yes

Yes

Yes

Yes Yes

Yes

Yes

Yes Yes

Yes Yes Yes Yes

Yes Yes Yes

Includes direct and indirect stakes. The relevant country is South Cyprus. North Cyprus is considered to be part of Turkey.

Yes

234

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236

(mobilkom) compared to Slovenia (si-mobil). In the Balkans, the same brand – Vip – is used in three markets (Croatia, Macedonia and Serbia) where it is either the second- or third-placed operator. A different brand is used in Bulgaria, where mobitel, Telekom Austria’s subsidiary, was the largest operator at the end of 2010. Given the relative market positions of the various mobile businesses, it is difficult to argue that the use of multiple brands has been disadvantageous. Indeed, given the market positions where the same brand has been used, quite the opposite could be argued. In both Macedonia and Serbia, where Vip is used, the Telekom Austria subsidiary is the third-placed operator in the market. That said, it may be too early to assess whether any benefits accrue from the use of the same brand due to the relatively recent launch of the operations in Macedonia and Serbia. TeliaSonera is present throughout the Nordic and Baltic regions. In the four Nordic markets where it is present, it comprises the largest mobile operator by subscribers in Sweden, the second-largest in Norway and Finland and the thirdlargest in Denmark. While it uses the same brand – Telia – in Denmark and Sweden, other brands are used in the remaining two Nordic markets. Different brands are also employed by TeliaSonera in Estonia (EMT), Latvia (LMT) and Lithuania (Omnitel). As the market position of TeliaSonera in these three markets is first in every case, it does not appear to be the case that separate brands have held back the company. While some of the remaining mobile businesses of TeliaSonera are contiguous, they do not use the same brand. Vodafone has not concentrated upon one regional market within the sample, but has instead invested across a broad range of countries. In those markets where it has invested and uses the Vodafone brand name, it is the largest operator in Greece, Ireland and Malta. Of the other markets where it is present, it is the second-largest in all but one case, the UK, where it was the third-largest operator at the end of 2009 before the creation of Everything Everywhere. According to the Vodafone website, it has established 24 partner network agreements in Europe as defined for this paper. The extent to which they have adopted the Vodafone branding differs, as does the degree to which they co-ordinate their marketing efforts with Vodafone. As a consequence, some of the partners have incorporated Vodafone into their name while others continue to use their existing brand and engage in other forms of co-branding activities. For example, in Iceland the brand name used is Vodafone Iceland, while in Estonia it is Elisa and in Switzerland it is Swisscom. The market position of the partners varies across the sample. In seven countries – Austria, Belgium, Bulgaria, Cyprus (South), Denmark, Finland and Switzerland – Vodafone’s partner was the largest operator by market share at the end of 2010. Interestingly, in only one of these seven countries, Cyprus (South), does Vodafone appear as part of the operator’s brand. Of the remaining partners, there was a more or less even split between those that were second- and third-placed in their respective markets. 5. Conclusion This paper has focused on incumbents within the mobile markets of a broadly defined Europe. From the literature review presented in Section 2 it is possible to identify a range of first-mover advantages that help the incumbent mobile operator maintain its position as the largest operator in the market once it has been liberalised. The paper has shown, in Section 4, that in many European markets, the incumbent remains the largest operator, suggesting that there are significant first-mover advantages in mobile markets. With this in mind, the first observation that can be made is that recent entrants have found it difficult to enter and then thrive in mobile markets in Europe. One possible explanation for this could be that mobile markets are highly concentrated, with the two largest mobile operators often controlling between them substantially more than half of the market. The division of the remainder of the market between the other mobile operators in the market impinges on their competitiveness, through, for instance, limiting their ability to enjoy scale economies. This should not be interpreted as implying that the dominant position of the incumbent mobile operator cannot be overturned as there are sufficient examples across Europe that illustrate that this is possible. One reason why the market position of incumbents has been overturned is that they did not migrate to successor technologies such as 2G that offered operators advantages over those using 1G. While the transition from 1G to 2G mobile technologies provided an opportunity for later entrants to overturn the leading position of incumbent operators in the market, this did not occur with the transition from 2G to 3G. Through leveraging their subscriber base and delaying their own migration to 3G, existing 2G mobile operators were able to withstand the competitive pressures that 3G-based new entrants such as Hutchison brought about. In those countries where 3G-only new entrants have launched, they are the smallest operator in the market. In other words, the advantages derived from 3G have, to date, proved insufficient to overcome those arising from an installed 2G subscriber base. A second observation is that the use of multiple brands by operators highlights the fragmented nature of the European mobile market. No operator is present in all of the European countries surveyed, although Vodafone comes the closest when its direct investments are combined with its 24 partner network agreements. Deutsche Telekom has focused its attention on two regions—Central and Eastern Europe and the Balkans, adopting a single brand in most countries. However, its minority stake in OTE is insufficient to enable Deutsche Telekom to impose the T-Mobile brand in the Balkans. The other operators that have built contiguous footprints for themselves, such as Telekom Austria and TeliaSonera, do not use a single brand in all their markets. The adoption of multiple brands by these two operators would suggest that the advantages associated with a single brand are not as clear as first imagined, with the use of a brand familiar within the national context being more important.

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236

235

The internationalisation that has occurred within the mobile telecommunications industry is reflected in the regional focus of some operators and the use of a common brand in more than a single market. Internationalisation enables operators to transfer learning between markets so that their competitiveness is enhanced as well as to enjoy scale economies in areas such as the purchase of handsets, while consumers benefit from a more competitive market and the ability to roam on preferential terms or access services outside of their home market. However, the manner in which internationalisation and its associated benefits influence the growth of operators in specific markets remains largely unclear. While Ibbott (2007) has explored how Vodafone has sought to integrate its various national subsidiaries, this is a relatively unusual. As it is not clear how, in practice, internationalisation has influenced the competitiveness of operators and thus enabled them to prosper, further research is required in this area. One aspect of this future research could be to determine how learning is transferred between national markets so that competitiveness is enhanced, while a second is whether the use of common brands improves the amount of revenue generated through roaming between national markets. This paper also suggests that further work is required in two areas. Firstly, there are benefits to be gained from engaging in comparative studies. By comparing the structure of mobile markets with that of other industries that share similar characteristics such as limited entry opportunities through licensing, successive generations of technologies or the need for large capital expenditure, it would be possible to ascertain how typical its concentrated nature actually is. If the other industries display a market structure where companies are more equally sized, regulatory action of some sort is required. Conversely, if these other industries are similarly structured, the case for regulatory intervention is diminished. Secondly, further work is required to create databases that enable trends within European mobile markets to be discerned. While the cross-checking of Curwen and Whalley (2004, 2008) with Global Mobile did increase the robustness of the database, additional work is required to ensure consistency and reliability. Only once this has been achieved can more sophisticated techniques be employed to explore the relationship between the incumbent and its position in the market. At the same time, additional variables need to be included in the analysis. One such variable would be the financial performance of the mobile operator. Although a variety of measures such as operating income and average revenue per user (ARPU) are available, two significant obstacles will need to be overcome: ensuring consistency between years and operators to enable meaningful comparisons to be made and ensuring that data are collected for more than just a handful of years. The financial performance of a mobile operator reflects the strategy that it has adopted, with enhanced profits indicating that the strategy has maintained or enhanced its competitiveness vis-a -vis other operators in the market. However, it does not shed light on whether the strategy was to focus on business or residential users or on pre-paid instead of post-paid users. Thus, another variable that could also be included in future research is the strategy that has been adopted by the mobile operator. This could take the form of an events analysis that identifies, for example, changes in strategy and then maps them onto market share and financial performance. A third set of variables for inclusion relates to the marketing activities undertaken by mobile operators. The analysis could include how much the mobile operator spends on marketing, or the impact that adopting a new brand or exclusively distributing a handset has on market share. Regulatory measures could also be included. One such measure would be whether mobile number portability has been introduced in a particular market, as its presence would encourage churn between operators through the reduction of switching costs. A second regulatory measure that could be included is the extent to which mobile termination rates have been reduced, with reductions encouraging operators to devise new strategies to retain and attract customers. References Atiyas, I., & Dogan, P. (2007). When good intentions are not enough: sequential entry and competition in the Turkish mobile industry. Telecommunications Policy, 31(8/9), 502–523. Bijwaard, G., Janssen, M., & Maasland, E. (2008). Early mover advantages: an empirical analysis of European mobile phone markets. Telecommunications Policy, 32(3/4), 246–261. Bohlin, E., & Granstrand, O. (1994). The race to European eminence. Amsterdam, The Netherlands: North-Holland. Brown, C. L., & Lattin, J. M. (1986). Investigating the relationship between time in market and pioneering advantage. Management Science, 40(10), 1361–1369. Coeurderoy, R., & Durand, R. (2004). Leveraging the advantage of early entry: proprietary technologies versus cost leadership. Journal of Business Research, 57(6), 583–590. Curwen, P., & Whalley, J. (2004). Telecommunications strategy—Theory and applications. London, UK: Routledge. Curwen, P., & Whalley, J. (2006). Measuring internationalisation in the mobile telecommunications industry. International Business Review, 15(6), 660–681. Curwen, P., & Whalley, J. (2008). The internationalisation of mobile telecommunications—strategic challenges in a global market. Chichester, England: Edward Elgar. Curwen, P., & Whalley, J. (2010). Mobile telecommunications in a high-speed world: Industry structure, strategic behaviour and socio-economic impact. Farnham, England: Gower Applied Business Research. Deutsche Telekom. (2007). Connected life and work: annual report. Bonn, Germany. Retrieved from: /http://www.download-telekom.de/dt/StaticPage/50/ 78/24/080304_DTAG_2007_Annual_report.pdf_507824.pdfS. Deutsche Telekom. (2009). Deutsche Telekom and France Telecom plan to merge T-Mobile UK and Orange UK to create new mobile champion. Retrieved from: /www.telekom.comS [Press release]. ¨ Dorrenbacher, C. (2000). Measuring corporate internationalisation—a review of the measurement concepts and their use. Intereconomics, 35(3), 119–126. Eliassen, K., & Sjøvaag, M. (1999). European telecommunications liberalisation. London, England: Routledge. Ferna´ndez, Z., & Usero, B. (2009). Competitive behaviour in the European mobile telecommunications industry: pioneers vs. followers. Telecommunications Policy, 33(7), 339–347.

236

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236

Fuentelsaz, L., Maı´cas, J. P., & Polo, Y. (2008). The evolution of mobile communications in Europe: the transition from the second to third generation. Telecommunications Policy, 32(6), 436–449. Gannon, M., Smith, K., & Grimm, C. (1992). An organisational information-processing profile of first movers. Journal of Business Research, 25(3), 231–241. Gerpott, T. J., & Jakopin, N. M. (2005). The degree of internationalisation and the financial performance of European mobile network operators. Telecommunications Policy, 29(8), 635–661. Greenfield Capital Partners. (2005). Telfort continues under the wings of KPN. Retrieved from: /www.greenfield.nlS. Huff, L. C., & Robinson, W. T. (1994). Note: The impact of leadtime and years of competitive rivalry on pioneer market share advantages. Management Science, 40(10), 1370–1377. Ibbott, C. J. (2007). Global networks: the Vodafone-Ericsson journey to globalisation and the inception of a requisite organisation. Basingstoke, UK: Palgrave. Johnson, D., & Turner, C. (2007). Strategy and policy for trans-European networks. Basingstoke, England: Palgrave Macmillan. Kerin, R., Varadarajan, P., & Peterson, R. (1992). First-mover advantage: a synthesis, conceptual framework and research propositions. Journal of Marketing, 56(October), 33–52. Lieberman, M., & Montgomery, D. (1988). First-mover advantages. Strategic Management Journal, 9(Summer), 41–58. Lieberman, M., & Montgomery, D. (1998). First-mover (dis)advantages: Retrospective and link with the resource-based view. Strategic Management Journal, 19(12), 1111–1125. Liu, C.-J., Chou, Y., Wu, S.-H., & Shih, Y.-S. (2009). The public incumbent’s defeat in mobile competition: Implications for the sequencing of telecommunications reform. Telecommunications Policy, 33(5/6), 272–284. Methe´, D. (1992). The influence of technology and demand factors on firm size and industrial structure in the DRAM market—1973–1988. Research Policy, 21(1), 13–25. Mobile News Direct. (2010). Orange and T-Mobile merger: Everything everywhere approved. Retrieved from: /www.mobilemarketingnews.co.ukS. Scherer, F. M. (1980). Industrial market structure and economic performance. Chicago, Illinois: Rand McNally. Stickel, E. (2001). Uncertainty reduction in a competitive environment. Journal of Business Research, 51(3), 169–177. Stienstra, M., Baaij, M., van den Bosch, F., & Volberda, H. (2004). Strategic review of Europe’s largest telecom operators (1992–2001): from herd behaviour towards strategic choice? European Management Journal, 22(3), 273–280. TeleGeography. (2010). New avenue of Ukrainian anti-monopoly investigation centres on Alfa’s Turkcell/Astelit stakes. Retrieved from: /www.telegeography.comS. Turner, C. (2005). The international strategies of Europe’s incumbent telecommunications operators: towards a strategic typology. European Business Review, 17(4), 340–351. Urban, G. L., Carter, T., Gaskin, S., & Mucha, Z. (1986). Market share rewards to pioneering brands: An empirical analysis and strategic implications. Management Science, 32(6), 645–659. Whalley, J., & Curwen, P. (2005). Consolidation vs. fragmentation—the case of the European mobile communications market. European Business Review, 17(1), 21–35. Whalley, J., & Curwen, P. (2006). Third generation new entrants in the European mobile telecommunications industry. Telecommunications Policy, 30(10/11), 622–632. Wu, F.-S., & Chu, W. L. (2010). Diffusion models of mobile telephony. Journal of Business Research, 63(5), 497–501.