Business Review SEE Investment Summit, 1st Edition

Romanian telecommunications an attractive target for foreign investors

Background information

Communications and Information Technology are one of the most dynamic sectors of the national economy and one of the most attractive for foreign investors.

The IT&C sector is the fastest growing of all fields in the Romanian economy and one of the fastest growing in Europe.

Some of the biggest telecommunications companies are among the most important and powerful companies in Romania Orange, Vodafone, Romtelecom (all of them have around 1 million euro turnover).

In 2006, the electronic communications market followed tendencies similar to the ones in the rest of Europe regarding the development of telephone and Internet services. The foreign companies increased their investments in Romania. The big players in Europe and USA are already present on the Romanian market and are investing largely in the sector.

Four years after full market liberalization, the Romanian communications sector is witnessing significant growth in all its segments and competition is developing with strong impetus.

Suffice is to say that according to the Romanian Agency for Foreign Investment (ARIS), telecommunications sector registered, in 2006, the highest value for investment projects - USD 1,306 billion. Thus, the telecommunications sector was involved in 57 projects, representing 22.61% from the total investment value.

The total IT&C market amounted from 2964 million Euro in 2003 to 4368 million Euro in 2005. The prospects are for 4822 million Euro in 2006 and 5140 million Euro in 2007. The figures are rising and this can only mean that the EU accession was a challenge we have met with great success.

Legal framework

Romania was the first country that adopted the new EU legislation for electronic communications since 2002.

On the 13th of September 2006 The Government Ordinance no.70 regarding the modifying and completion of certain legislative acts in the domain of electronic communications and postal services was adopted.

The main objectives of this ordinance are the full harmonization of the national legislation with the European one, perfecting the legal framework regarding the monitoring tariff, modifying the penalty regime regarding the legislation in the domain of electronic communications and postal services.

After the adoption of this ordinance, the providers of electronic communications services will be able to operate more easily on the market. Thus, one of the objectives of this ordinance is to simplify the way that the electronic communications providers can be authorized and begin their activity. Now, they must only notify ANRCTI and then they can begin their activity. Investing in Romania

The philosophy of the ones who decide to invest

First of all, an investor looks at the growth rate of the market (20 25% for the IT&C sector per year) as a whole of the sector in which he has interest.

The communications market in Romania overtakes markets in countries like Hungary and Poland, which have inferior growth paces. Romania has even a lightly superior growth compared to the one registered as the average in the EU member states.

The Romanian electronic communications market has a lot of strong points the players on the local market have two major advantages their activity is according to the European legislation (it was like this even before the EU accession) and the technological neutrality promoted in our country allows them to use technologies whose usage is limited in other states (ex. CDMA 450).

Thus, Romania has many advantages in this regard:

-the possibility of an operator to establish the interconnection, in fair conditions, with the network of the operators with significant power on the market;

-the possibility to offer the users of telephony services to choose the transporter or to have access to the users of the ex-monopolist operator by means of his local loop.

These aspects are regulated in Romania and function perfectly, the big number of interconnection contracts signed with Romtelecom, Orange and Vodafone standing as a proof.

Statistical data on the telecommunications market

In March 2007, the number of electronic communications providers operating on the Romanian market was 2591 a high value generated by the easy general authorization regime.

According to the preliminary data for 2006, the alternative network access providers reached almost 20% and we are now dealing with 105 fixed telephony providers, compared to 59 at the end of 2005.

The mobile telephony for example, has reached an 80% penetration rate at the end of 2006, growing with almost 30% in less than 6 months. This means that by 2009, every person in Romania will be using a mobile phone and the premises for the apparition of virtual operators will then be created.

Concerning the services for Internet access, Romania has with 80% more internet connections than it had back in December 2005: 3.3 million, with a penetration rate of 15.2%.

1.8 million are broadband connections, which means that the number of broadband connections increased with 135% since December 2005 penetration rate 8,2%. At the end of December 2005, the number of broadband connections was 751.000, and in June 2006 1,2 million penetration rate of 5,5%.

All these figures are impressive and they say a lot on the way Romania has been preparing for adhesion and how the companies on the IT&C market got ready for joining EU. The Romanian IT&C sector is ready to face any challenge on the European market.