In the telecommunications market, there is fierce competition for customers, and besides offers, the three main competitors, HT, A1, and Telemach, are competing with massive investments in infrastructure. The CEO of the second-largest telecom, Jiří Dvorjančanský, who has been in Croatia for eight years, discusses the state of the market and A1’s plans for Lider.
You are the first telecommunications operator to start indexing, i.e., increasing prices due to alignment with inflation. What reaction and impact on revenues do you expect considering that your competitors have not yet started?
– Even with an adjustment of 8.5 percent, which is lower than the official inflation rate of 10.8 percent, we will still be very competitive. Compared to our main competitor, our prices are 15 to 20 percent lower. Additionally, we are increasing network capacity and speeds, which is why we will continue to offer the best price-quality ratio. Of course, we are cautious and monitor the situation, but I do not expect a negative impact on financial results due to customer departures. Inflation has hit us from multiple sides, from energy costs, wage increases, increased investments to the costs of equipment and devices we offer to customers. By adjusting by 8.5 percent, we ensure necessary large investments and business sustainability.
There is a belief in the market that A1 has established itself as a leader in terms of the number of new connections and generally newly built networks over the last decade. Has the transition from an exclusively mobile operator to a full-spectrum operator with all services in mobile and fixed networks been completed?
– Twenty-four years ago, we entered the Croatian market as a mobile operator and at that time the largest greenfield investment. With the acquisition of B.net in 2011, we rounded out our portfolio with home internet, television, and telephone, thus becoming what is technically referred to as a convergent operator. It was the largest acquisition in the Croatian telecommunications market at that time. Today, we are by far the largest gigabit fixed network in Croatia, as confirmed by the numbers. We connect 672 thousand households with the most modern next-generation fixed network. Behind all this is nearly one billion euros in investments, but, more importantly, the knowledge and innovations of A1 experts, as well as the desire to digitalize every corner of Croatia.
You invested 109.28 million euros in the radio frequency spectrum. How much do you plan to invest in the modernization and development of next-generation networks? How is the construction of the fixed network progressing, which you plan to connect 70 percent of households?
– We are committed to developing globally competitive high-performance mobile and fixed networks, digitalization, and advancing Croatia according to the Digital Economy and Society Index (DESI). After investing 109 million euros in the spectrum, new large investments in technology and modernization will follow. Our strategy is to use all radio frequencies in the future as 5G standards to support the best user experience and ensure maximum availability, reliability, and security for both our private and business users. By the end of this year, we plan to cover 85 percent of the population with the 5G network. We are also investing significant funds in building and modernizing the most modern fixed network in Croatia. With the mentioned 672 thousand gigabit fixed connections, we are far ahead of all other operators. Each year, we build 150 thousand new optical connections, and by 2025, we will cover a total of one million households, which is 70 percent of the total number in Croatia. No one will be able to compare with us in terms of quality and availability of gigabit connections for a long time.
That sounds quite ambitious as your competitors are not idle either. HT remains a dominant player, and Telemach also has very ambitious plans…
– We have always been ambitious and persist in realizing our plans. The competition still largely relies on copper infrastructure, especially outside larger cities, and there we are challengers, creating a competitive market by building the most modern optical infrastructure and providing better service to users who currently have low internet access speeds. Our hybrid optical-coaxial network, which has been completely modernized and supports gigabit speed, also contributes to this. Others will need years to reach our coverage. Rural areas are our dominant space for expanding optics, and we are more competitive there than other operators.
Despite the crisis and inflationary pressures, you are recording growth in all key financial indicators. What will the second quarter of this year look like, and what are the projections for the end of the year? How does the revenue structure look by segments?
– The last three years and the challenges they brought, from the pandemic, the war in Ukraine, and supply chain disruptions to rising energy, raw material, and chip prices, have significantly changed the way we manage. We have optimized costs, invest smarter where we assessed that investments can bring the greatest value, and we revise plans frequently instead of a few times a year. Good business indicators are the result of significant investments and business development over the past few years. By the end of the year, we will generate about 70 percent of our revenue from private users and 30 percent from businesses. In the business segment, we are recording growth thanks to not only the reliability and availability of A1 networks but also the strong growth of ICT services, which could be 50 percent higher this year. This is proof that we are a premium digital partner for every business user, whether in the public sector or any industry. At the same time, we are creating an excellent foundation for continuing large investments in the most modern infrastructure and thus the digitalization of Croatia.
How do you comment on the fact that TV operators in selling their services are becoming dependent on content in triple-play offers, especially since the ownership of those channels is held by other entrepreneurs?
– TV content is an important segment of our offer, and we truly strive to have a partnership relationship with channel owners or rights holders. In recent years, content costs have significantly increased, which burdens our business. Despite this, we still have the most competitive offer with a total of 220 channels in three basic packages – Family, Sports, and Movies – as well as more than 20 thousand titles in our on-demand library. I would highlight premium sports and movie content, which our users receive at no additional charge as part of the Basic Movie and Basic Sports packages.
Have you managed to reach an agreement with Nova TV, and is that relationship a partnership considering that the owner is your competitor?
– Nova TV should in no way be a competitor to any distributor. Its operations are primarily regulated by the Electronic Media Act. The fees that Nova TV, as well as other TV channels with national concessions, receive are regulated by decisions of the Agency for Electronic Media based on the Electronic Media Act. In other words, the most important part of the partnership relationship with Nova TV is regulated by a sector-specific regulator, which reacts in regulatory practice if partners cannot reach a commercial agreement.
Read the entire interview in the new printed and digital edition of Lider.
