Bulgarian mobile market: coping in a challenging macroeconomic environment
ad hoc study
Bulgaria is a member of the European Union (EU) and is classified as a developing country by multinational organisations such as the International Monetary Fund IMF). While the country experienced high economic growth especially before and upon its accession to the EU in 2007, several macroeconomic headwinds such as declining population, increasing unemployment rates and political instability have negatively impacted consumer demand and business prospects. Despite these risks, we observed that mobile operators in the country were able to cope with the challenges and even achieve profitability by cross-selling mobile with fixed services, as exemplified by the success of Vivacom which registered around 8% YoY mobile revenue growth in 2014 mainly because of this strategy. On the other hand, Telenor and MTel turned to stricter operational cost controls (e.g. lower handset subsidies, reduced marketing and sales expenses) to manage profitability amidst their declining revenues. Looking ahead, we believe that the next few years will even be more crucial for the Bulgarian mobile market, as tighter regulatory measures (e.g. reduction of mobile termination rates) and the uncertainty on the attribution of additional mobile frequencies will further define the risks and potential opportunities for the operators.