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Turkish fixed-line telephony market to peak this year

Despite continuing economic growth in the country, IDC says that the telephony market in Turkey continued to expand in 2004.

According to a new IDC study, spending rose by 9% to US$4.5 billion last year in Turkey’s telephony market. Although partial liberalisation resulted in the issuing of 43 long distance (DLD) and international calling (ILD) licenses, IDC believes true competition in these areas will not emerge until late in 2005.

After being delayed in 2004, the Turk Telecom privatisation process finally came to an end this July. A majority share of the operator was sold to the Saudi-based Oger consortium that includes Telecom Italia, which already owns a 40% share in Avea, Turk Telecom's mobile arm.

The sale arose from the Privatisation Agency’s replacing the previous arrangement for selling 51% of the company with a tender for a block sale of 55% in October last year. This attracted bids from 13 domestic and international organisations, as the government has approved foreign ownership of a majority share.

"The consortium that purchased Turk Telecom is faced with the challenges of historically fluctuating profit margins," says Mohsen Malaki, IDC’s programme and consulting manager of communications in the MEA region. "But they have also bought a massive customer base and a fixed-line infrastructure in a country with high unmet demand for telecommunications services."

Despite a healthy economy and an increase in consumer spending, the number of fixed-line calling minutes declined in Turkey in 2004. This stemmed from Turk Telecom's tariff rebalancing, which was heavily slanted towards high-volume business clients.

"This retooling of the tariffs will have a dramatic impact on usage patterns. While the new rates will further drive consumers to pick up mobiles or voice over IP instead of the circuit-switched fixed line for their DLD and ILD calls, high-volume business use will increase, solidifying an important customer base for long-term gain,” says Malaki.

As a result of market liberalisation efforts by the regulator, expected intensification of competition in voice calls will place downward pressure on prices over the next few years. Now that the sale of Turk Telecom has gone through, the government will likely take more aggressive liberalisation steps, like local loop unbundling and expanded provisions for alternative fixed-line service providers.

With most businesses expected to stay on with Turk Telecom in the near term due to the lack of track records by new entrants, the consumer segment will serve as the battleground for additional customers. "Newly licensed DLD and ILD providers can establish firm footholds by targeting the residential users with their card-based services," says Malaki.

IDC's Turkey Telephony Services 2005-2009 Forecast sizes and analyses, the markets for circuit-switched fixed-line telephony services in Turkey. The study segments circuit-switched fixed-line telephony services connections by business and residential, with business being further segmented by size. Telephony traffic and spending is segmented by service type; outgoing calls; connection and subscription fees; local calls; internet calls; national calls; fixed-to-mobile calls, and international calls.

The study details the current size of the telephony services market and how it will grow over the next five years. It also highlights services that it believes will fuel growth, market inhibitors, and the strategies likely to be implemented by incumbents and new entrants.

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