Telecommunications in Bosnia and Herzegovina

26 November 2006

Before the war erupted in the early 1990s, there was a well established telecommunications infrastructure in Bosnia and Herzegovina that included the telephone and telegraph network, as well as a network for transfer of data. The total capacity of B&H telephone exchange facilities was 744,000 telephone lines. The war caused huge material damages on telecommunications facilities. In addition, the administrative division of the country into two entities created a division in the telecommunications sector.

The �Telekom Srpske� shareholders� company of today, a telecommunications operator working in the Republic of Srpska, is the legal heir to the telecommunications public enterprise created after the division of postal and telephone services company of RS. In the B&H Federation, there are two national telecom operators: BH Telecom Shareholders Company, which separated from PTT Bosnia and Herzegovina, and the �Hrvatske telekomunikacije� LTD Mostar, created when HPT was divided into two distinct companies � the Croatian Postal Services and Croatian Telecommunications.

There is one specific aspect in Bosnia and Herzegovina, i.e. the existence of three nationally (in the sense of ethnic) monopolistic teleoperators. The less informed people may think that this is some sort of paradox, having in mind that in normal countries the existence of more than one teleoperator would imply free and fair market competition, resulting in diverse services on offer and other benefits for the users, especially in terms of prices policies.

Those well versed in local affairs, however, know that in a country with two entities and three nations, the telecoms, too, are divided along ethnic and territorial lines. Their prices are similar, to the effect that a citizen is charged 76.69 EUR to start subscriber�s agreement with each of the three operators, while one minute of local call costs approximately 0.0132936 EUR (BH Telecom), 0.0138049 EUR (HT Mostar) and 0.0102258 EUR (Telekom Srpske). One minute call to the European countries ranges from 0.669792 EUR (BH Telecom), 0.766938 EUR (Telekom Srpske) to 0.942822 EUR (HT Mostar), while the prices for calls with the rest of the world range from 0.879422 EUR/min at BH Telecom, 1.27823 EUR/min at Telekom Srpske, to 1.54512 EUR/min at HT Mostar.

The survey included in UNDP�s Early Warning Reports for the first quarter of 2004 and first quarter of 2005 shows that 80.1% of all B&H households have fixed telephone line. The survey didn�t register variations between individual regions in terms of penetration of fixed telephone services. On the other hand, it clearly points out that availability of telephones is much greater in urban, compared to rural areas. This is corroborated by the survey of standards of living of B&H citizens, which found that 85% of urban households have telephone lines, compared to just 60% of households in semi-rural and rural areas.

The work of all telecom operators in Bosnia and Herzegovina, together with the process of privatization of telecommunication companies and liberalization of the market, as well as the implementation of accepted legal obligations, is overseen and supervised by the Telecommunications Sector of the Regulatory Agency for Communications (RAC). The Decision on Policies of the Telecommunications Sector of 2002, adopted by the Council of Ministers of Bosnia and Herzegovina, emphasizes the need to secure that the whole population of the country has access to public telephone services at affordable prices, through balanced and time-restricted control over the liberalization and the appropriate legislation. Also, the Governments of both entities should select, upon prior agreement with operators, the best model and method of privatization, in order to be able to start the privatization in the sector in the second half of 2002.

The three national telecom operators, according to the structure of ownership, remain state-owned companies, at least the state is the majority owner in each of them. Therefore, the state owns 90% of BH Telecom Co. Sarajevo, 65% of Telekom Srpske a.d. Banja Luka is owned by the Republic of Srpska, while the state owns 62.76% of Hrvatske Telekomunikacije d.o.o. Mostar. Today, near the end of 2006, the privatization process is still in the initial stage and causes vitriolic debate and political rifts on national, entity and party levels.

The Government of RS has gone the farthest in privatization negotiation and has set the price for 80% of the Telecom of Srpska at approximately 400 million EUR (800 million KM). Such plans meet with disagreement in some circles in the Federation, who believe that the price was set too low, reducing thus the asking price for the other two operators working in B&H Federation. This opens the field to speculation and debate whether the telecoms should be privatized on national or entity level, and whether the lead should be given to political parties or specialised state agencies.

Also, many economists point out that B&H telecommunications companies are worth much more than the media speculations and that each will be sold individually. They claim that political feuding over the privatization could result only in a massive fall of their value.

In line with the opinion that telecommunication services offer the best value for the money in conditions of market competition, the ultimate goals of the Telecommunications Sector Policies is to fully liberalize the services, something that remains to be done to this day. It was only at the beginning of this month (November 2006) that the first alternative telecommunications operator � T3 Telecom starting its commercial activities. T3 aims, according to a public statement released by the company, to offer cheaper and simpler communications than those they used before. According to claims, the prices for international traffic should be 50% of the current prices, while national calls� prices will be about 20% lower. The citizens may purchase a pre-paid card to use the services in one of the points of sale or if they are subscribed to a cable TV operator, by concluding a contract with T3 and a cable television. The legal entities will be offered contracts that include automatic installation of the necessary equipment to connect to the T3 network. The new telecom operator will provide the opportunity to keep the existing telephone numbers, i.e. the possibility for parallel dialling through the dominant operators. Also, the monthly subscription will be paid only to the dominant operator, while T3 will charge only for seconds of completed calls.

The appearance of T3 Telecom, after years of monopoly held by the three national operators, marks the start of the process of liberalization of telecommunications markets in Bosnia and Herzegovina.

As far as mobile telephone services are concerned, full liberalization was achieved, to the effect that three mobile operators work in B&H: BH Mobile, Eronet and Mobi�s. Although they initially covered only strictly divided territories, all three operators have already established sales centres in all parts of the country, which has had a positive effect on expanding range of services and packages at increasingly more affordable prices. As a consequence, the number of users that will select their operator led by their financial interests instead of ethnic or local patriotic interest. Surveys based on comparison of number of mobile phone users and estimated population in B&H lead to the conclusion that penetration of mobile telephone services in the country lingers around 40%.

The RAC data claims that there are 151,959 internet users in B&H, registered is private persons. Having in mind the fact that the average B&H family has 3.2 members, we could conclude that 12.63% of the households, or about half a million citizens have internet in their homes. Add to this number the 24,532 internet connections registered by legal entities and that an average firm has 13 employees, the simple math shows (24,532 x 13) that 318,916 citizens can access internet technologies in their workplace, which is 8.3 percent of the population. Accumulated, these two figures reach the level of about 21% of total individual penetration of internet in B&H society.

It should be interesting to compare this with the percentages of internet penetration for the European Union (86% in December 2003), or the average for Central and Eastern Europe (74%). For instance, Bulgaria is at 47%, Romania at 41%, while Slovenia has the incredible 94% penetration. This is ample illustration how far B&H society lags behind the neighbouring countries. The reasons should be sought primarily in the financial depravity of the large segment of the population, but also to the inadequate offer of internet services.

According to the data available to the Regulatory Agency, there are 41 internet service providers with valid working licenses. The number has not changed significantly over the past several years, and the same is true for the services they offer, although the major telecom operators did expand to a variety of new services.

In 2005, 84,000 users accessed internet through dial-up connections. The monthly subscription fee is 6 KM (app. 3 EUR) for the simplest package, with additional charge of 0.01KM (0.005 EUR) per minute of online time. Broadband technology entered B&H only at the end of 2003. In 2005, there were 4,845 ADSL users in the country. The prices for ADSL connection, depending on the package one wished so use, range from 35 to 60 KM (18-30 EUR), with additional opportunity to purchase more expensive packages with unlimited upload and download. Regarding cable internet, there are 4,751 registered cable internet users. There were also 3,046 users of wireless internet in 2005.

The 2005 UNDP report on e-readiness of B&H society concludes that dial-up remains the most popular connection to the internet, used by 48.7% of polled citizens. The relatively high level of cable penetration (26%) shows that broadband technologies gain momentum, thanks primarily to the private sector.

The issue of underdeveloped information sector in Bosnia and Herzegovina has been recognized, resulting in the fact that the Council of Ministers adopted, in November 2004, the National Policy, Strategy and Action Plan for development of information society in the country. The process was lead by the Ministry of Communications and Transport and UNDP. Lamentably, to this day, the B&H society can�t really boast that it brought this topic to the fore, so that the public doesn�t recognize the development of information society as issue that deserves great attention.