Fixed-line communications, from local to international level, is still a monopoly of incumbent telco Estonian Telephone Company (ETC), which is 100% owned by holding company Estonian Telecom Ltd. (Eesti Telekom). In early 1999, a highly successful IPO resulted in the privatisation of 49% of Estonian Telecom itself. Basic network services are due to be opened up to competition on 1 January 2001, according to a concession agreement between the MTT and ETC. Until then, ETC faces no competition in fixed-line telephony, but has made commitments to invest into and improve the PSTN.

Peep Pldsamm, director of strategy at Tele2 Media, said in August 2000 that he expects ETC to lose around 25% of its market share within three years after the liberalisation. ET itself believes that it could lose 20% of its market within two years. Analysts expect that in 2001 the price of local calls will increase and the price of international calls will drop, as the practice of cross-subsidising ends.

ETC has been operating the PSTN since 1993, following the signing of a Concession Agreement in 1992. A fibre-optic network, built as a digital overlay network connecting digital switches, connects the exchanges of main cities and forms the national trunk network, with international links based on SDH technology. There are international links to Helsinki, St Petersburg, Latvia and Sweden. There is a gateway to the international ATM network (Helsinki - Tallinn). The basic fibre-optic cable rings were completed across the entire country by end 1997. There are now over 4,000 km of fibre-optic cables. In mid-1999, Finland's Supertel was ordered to give up the lines that it was using to provide an alternative long-distance service, on the grounds that it was breaching ETC's monopoly. Supertel appealed the decision, but the fact that it was sharply undercutting ETC's still-to-be-rebalanced tariffs should predetermine its defeat.

The access network has been expanding steadily too. The strategy is to install 42,000 new digital numbers each year, and another 25,000 to replace old analogue numbers. In some rural areas, wireless local loop is being rolled out. As of 1998, around 38% of main lines were connected to digital exchanges. Key targets to be reached by 1 January 2001 include 43% teledensity, and 60% main line digitalisation. In principle, waiting time for a main line is to be reduced to as little as one month.

Voice-over-IP services are of growing importance in the fixed-line sector. In October 1999, Eesti Telefon and Microlink Online both claimed to have around 10,000 customers using their dial-up IP services, with plans to extend their services further. Voice-over-IP is not considered to hinder Eesti Telefon's long-distance and international monopolies.

According to the Statistical Office, the number of local calls amounted to 170m in Q1 2000. Of the 22.5m long-distance calls, 32% were connections with foreign countries, and the average duration of long-distance calls was 2.97 minutes.

Leading Players

• Eesti Telefon (Estonian Telephone Company)

ETC is the incumbent telco. It has been operating the PSTN since 1993, and it has gone a long way towards modernising it. A new fibre-optic network, which has been built as a digital overlay network connecting digital switches, connects the exchanges of main cities and forms the national trunk network, with international links based on SDH technology. There are international links to Helsinki, St Petersburg, Latvia and Sweden. There is a gateway to the international ATM network (Helsinki - Tallinn). The basic fibre-optic cable rings were completed across the entire country by the end of 1997. There are now over 4,000km of fibre-optic cables.

Under its 1992 concession agreement with the government, ETC enjoys a monopoly on basic fixed-lined services until 1 January 2001. In exchange, ETC is implicitly expected to invest heavily into the PSTN and overhaul basic services prior to liberalisation. Thus, each year, ETC is meant to install 42,000 new digital main lines, as well as replacing 25,000 analogue main lines. A teledensity of 43 main lines per 100 inhabitants is targeted for the end of 2000, resulting in a fall of waiting time for a connection to just one month. Also by 2000, ETC hopes to have digitalised 60% of all main lines. This should have reached 100% by 2006, which is the last year of ETC’s current business plan.

ETC is 100% owned by holding company Estonian Telecom Ltd. (Eesti Telekom), which is itself 49% owned by the Sonera-Telia Baltel consortium and 23.7% by the state. ETC made investments totalling EEK2.3bn (US$164m) between 1993 and 1997, and will invest a further EEK700m (US$50m) yearly until the end of its monopoly.

In January 2000, it emerged that Eesti Telekom had failed to reach an agreement with the Telecoms Ministry on the 2000 business plan for Eesti Telefon. According to the Telecoms Ministry, the latter had failed to meet the terms of the concession agreement from 1992. Eesti Telekom, for its part, argued that it was under no legal obligation to present its full plans to the Ministry, but it did say that its level of investment in 2000 would correspond to that of 1999. By March 2000 the incumbent had still failed to reach an agreement with the Telecoms Ministry on compensation for the shortening of its monopoly. By August 2000, the situation had hardly improved: the Estonian Transport Ministry said that it was likely to reject the 2000-2009 business plan of Eesti Telefon (PT), the fixed-line incumbent, citing disagreements over the ET's intention to hike local call tariffs and its timescale for line digitalisation and bringing down waiting lists for connection.

In October 1999, ETC stopped charging connection and monthly fees on its Atlas dial-up internet access service. As of that date, ETC commanded around 23% of the internet market.

However, from 2001, the firm expects to lose fixed-line market share. Peep Pldsamm, director of strategy at Tele2 Media said in August 2000 that he expects ETC to lose around 25% of its market share within three years. ET itself believes that it could lose 20% of its market within two years of liberalisation. Analysts expect that next year the price of local calls will increase and the price of international calls will drop, as the practice of cross-subsidising ends.

In April 2000 the company offered WAP services over its network for the first time. At that date more than 43,000 owners of the address '@hot.ee' had the ability to read and send e-mails with mobile telephones on WAP-protocol.

Other

Licences permitting the construction of alternative infrastructure are actually available, but the MTC had not issued any such licences by the end of 1998. Cable telephony should remain illegal until the end of ETC’s monopoly in 2001. In practice, therefore, fixed-line competition remains restricted to (i) closed-user group data and voice, and (ii) multimedia and value-added services over leased ETC lines or cable networks. There are 21 public data operators, and 10 that offer private data network services. There are also alternative internet access providers, and a presence from several global value-added service providers. (See below: Satellite, Cable and Multimedia and Data Communications/Value-Added Services).

Cable Communications

CATV

It is estimated that around 80% of the total population live in apartment buildings passed by CATV networks. There were approximately 60-70 CATV and SMATV operators at the end of 1997, but a new CATV law has resulted in consolidation (see Regulatory Environment). The two main operators are Levicom, which has a network in Tallinn and another across the country, and STV Kabeltelevisiooni. Competition between the two has been fierce, with accusations of anti-competitive attitudes flying both ways. The bulk of the CATV industry is represented by the Estonian Cable Distribution Union (ECDU), which has 33 members, although Levicom distances itself from the ECDU. Given the small size of the market, future CATV expansion will be within limits, but the industry can look forward to the future liberalisation of cable telephony, which will probably take place in 2001. In February 2000, Telia, the Swedish telco, announced that it was to sell off its Estonian CATV company, Starman. It took the decision for the reason that under Estonian law no single operator is allowed to own a telecoms and a CATV operator.

Subscribers numbered 33,000 in 1995, 58,000 in 1996, 83,000 (1997), 99,000 (1998) and 126,000 in 1999.

Leading Players

• Levi International Communications (Levicom)
  
  Among the ventures launched by Levicom, Levicom Broadband (BroadCo) has internet and CATV activities in Estonia. BroadCo operates two networks. The first is TCATV, which is a joint venture with the city of Tallinn (5%) and Telglobe International (30%) serving the capital. By 2000, TCATV is scheduled to cover 200,000 Tallinn homes with its new advanced cable network. The second, Levi Cable, serves the rest of the country. By the end of 1997, it had cable networks in 13 cities, passing 41,000 homes. By the same date, TCATV had actually connected 13,500 homes, and Levi Cable around 24,000. By Q2 2000, the company had 61,000 subscribers. Through a subsidiary called Prism, TCATV also offers internet access via modem, and this service is being extended to Levi Cable’s networks too. Prism is expected to move into cable telephony when the latter is liberalised at the end of Estonian Telephone Company’s monopoly. In February 1999, Sweden’s Netcom bought 20% of BroadCo. Levicom retains the other 80%.
   
• STV Kabeltelevisiooni
  
  STV is BroadCo’s main competitor in the field of CATV. Its competition with BroadCo has been the source of some controversy. STV has been accused of unfair competition by undercutting subscription charges, whilst BroadCo has in the past obstructed interconnection with STV under technical pretexts. STV is expanding into other areas, such as internet access. In mid-1999, it is planning to start offering local telephone services on its cable network, and in February 1999 it ordered 600 phone numbers from ETC. However, the authorities have objected on the grounds that STV has not sought a licence or agreement with ETC.

Mobile

Cellular mobile communications have experienced dizzying growth in recent years, although the economic slowdown of 1998-1999, caused by Russia’s crisis is likely to result in a concurrent cellular mobile sector slowdown. The market was given a boost by the insufficiencies of the PSTN, despite ETC’s progress in upgrading the latter. Another factor in fuelling growth has been the proximity of Finland, which has a very high rate of cellular mobile market penetration. Many Finns take the three-hour ferry to Tallinn for weekend trips, and an estimated 50% of them have mobile phones.

Nevertheless, much of the subscriber growth in late 1998 and early 1999 was attributable to the launch of new pre-paid services in 1998, which should eventually lead to an erosion of ARPU (average revenue per user), as subscribers exercise direct control over their usage. Revenue and profits will continue to be good, due to existing high usage and corporate customers, and the scope for further expansion of the market. However, as of August 1999, the market's phenomenal growth was expected to slow down. There will be an increased focus on lower-end users, as the business market starts to become saturated.

The sector is open to competition, and licences are awarded by the MTT. At present there are four main operational networks:

• An analogue NMT-450 network operated by mobile incumbent EMT (Estonian Mobile Telephone Co., 51% controlled by Estonian Telecom, itself 49% privatised) since 1991, with 100% coverage of the population. This is due to be shut down by the end of December 2000.
• EMT-GSM, a GSM 900 network operated by EMT since 1995, with almost total coverage of the population.
• Q-GSM, a GSM 900 network operated by Ritabell (itself 90% owned by Sweden’s Netcom) since 1997, with almost total coverage of the population.
• Radiolinija Estonia, a GSM 900 network operational since 1995, with almost total coverage of the population.

In March 1998, EMT launched a new GSM 1800 network. At present, it is really only available in the centre of Tallinn, within which it acts as an extension of EMT-GSM 900. Since handsets capable of operating both GSM 900 and 1800 frequencies are rare, the main purpose of the GSM 1800 network is to offer roaming to the clients of other European GSM 1800 operators. Estonia is also preparing to adopt UMTS as its third-generation cellular mobile standard, perhaps launching joint licences with Latvia and Lithuania.

There are two wide-area paging operators, both running a POCSAG network: Estonian Paging, launched in 1993 (6,180 subs end 1997), and Baltcom, launched in 1995 (12,000 subs end 1997). Both have near-total coverage of the population. However, subscriber numbers have dwindled in the face of competition from mobile subscriptions, from 13,375 in 1996, 11,116 (1997), 11,803 (1998) and 8,512 (1999).

Estonia's Statistical Office stated that in Q1 2000, mobile networks accounted for 11% of the more than 216m telephone calls that were made in Estonia during the first three months of 2000. The average duration of calls to the mobile network was 1.14 minutes.

Leading Players

• Eesti Mobiltelefon (Estonian Mobile Telephone Co.)
  
  EMT is owned 51% by Estonian Telecom (holding company) and 49% by the Baltel consortium, which is made up of 50% Sonera (Finland) and 50% Telia (Sweden). Estonian Telecom itself was 49% privatised in early 1999 through an IPO, so that EMT is now mostly in private hands.

EMT was created through investments from Telia and Sonera, which together invested around EEK4m into it. It operates two cellular mobile networks: (i) an old analogue NMT 450 network since 1991, with 100% coverage of the population, and (ii) a GSM 900 network called EMT-GSM since 1995, also with almost total coverage of the population. The analogue network has seen its subscriptions decline since 1997, due to the rolling out of the country’s digital GSM networks. EMT plans to shut the network down by the end of December 2000. By the end of September 2000 EMT reported 316,000 clients (of which 210,000 on a monthly fee and 106,000 on pre-paid cards), having gained 24,000 new subscribers in Q3 2000. As of Q2 2000 it controlled about 63% of the market.

In March 1998, EMT launched a new GSM 1800 network. At the moment, it is really only available in the centre of Tallinn, within which it acts as an extension of EMT-GSM 900. Since handsets capable of operating both GSM 900 and 1800 frequencies are rare, the main purpose of the GSM 1800 network is to offer roaming to the clients of other European GSM 1800 operators. In October 1999, the company announced plans to provide the world's first global positioning system for mobiles, primarily aimed at emergency calls, so that the user's geographical location can be found immediately. The service will use Ericsson equipment.

• Radiolinja Eesti
  
  Radiolinja Eesti is a wholly-owned subsidiary of Finnish GSM operator Radiolinja. It operates Estonia’s second largest GSM 900 network, Eurofon 256. The network was launched in 1995 and has near-total coverage of the population. At the beginning of 1999, Radiolinja Eesti had around 51,000 subscribers. In March 1999, the company posted losses of US$3m for 1998, on sales of US$12.1m. However, its turnover and market share increased by 62% and the loss was attributed to long-term investments, the payback period for which is estimated to be six years.

By Q2 2000 it had around 100,000 subscribers and 24% of the market.

• Ritabell
  
  Ritabell, which operates under the Q-GSM trademark, launched its GSM 900 network in 1997. It used to be 100% owned by Levicom Cellular, but in February 1999, Sweden’s Netcom acquired 90% of Levicom Cellular itself, giving it 90% control over Ritabell. Levicom Cellular retains 10% of Ritabell. At the beginning of 1999, Q-GSM had 45,000 subscribers and near-total coverage of the population.

By Q2 2000 it had around 68,000 subscribers and 13% of the market.

• Estonian Paging Co.
  
  The Estonian Paging Company has total coverage of the population with its POCSAG network which launched in 1993. It is 60% owned by Estonian Telecom (itself 49% privatised), and 40% by Sonera. However, ET may divest itself of its 60% in the near future, as part of the national telecoms privatisation process.

At the end of 1997 it had over 6,000 subscribers. However, this had fallen to 2,500 by August 1999 and 1,500 a year later. From mid-1999 Estonian Paging has focused more on providing and developing encrypted communication services - which had 2,500 subscribers by August 2000, in order to avoid a total collapse of the business due to competitive pressures from mobile providers.

• Baltcom Estonia
  
  Baltcom is an Estonian-American joint venture. Its main shareholders are US media giant MetroMedia International Telecommunications Inc., and KTK Overall. Baltcom started operating its paging network in January 1994, initially in Tallinn and the surrounding area. It now offers almost total coverage of the national territory. Although Baltcom is the largest paging operator in the country, it has seen a steady decline in subscriber numbers. In mid-1998 they numbered 14,000 but that had fallen to 10,000 by August 1999 and 7,000 in August 2000.

Satellite Communications

Estonia became a member of Eutelsat in 1994. Only two VSAT licences have been awarded. There seems to be little interest in the provision of satellite business services. The market for DTH satellite TV is more developed, with between 20,000 and 50,000 DTH homes as a rough estimate at the end of 1997. However, the potential for further DTH expansion is limited by the size of the market, more than a third of which already has access to a TV.

Data

Leading Players

• Eesti Telefon (Estonian Telephone Company)
   

  ETC created a Data Services Division (DSD) in 1990. It operates a range of services, including Eestpak Data (public packet-switched data network), MagNet (frame relay), and ETNet (internet access). Estpak Data offers near total coverage of Estonia, using X.25 and X.28 through leased lines or dial-up. ISDN is also available in large parts of the country, and the range of ISDN options is growing. The number of ISDN lines has grown from 16 in 1996, 9,082 (1997), 22,478 (1998) and 26,226 (1999). There is an ATM link between Estonia and Finland, and ETC is to develop a national ATM network. Estpak Data offers international data links to nearly 100 networks abroad, and international ISDN services are also being developed.

• Esdata
  
  EsData Ltd. provides data communication and internetworking services. The company was established in December 1993 on the basis of the Computer Centre of the Institute of Cybernetics, which was the first institution in Estonia to implement connectivity to worldwide Internet. Esdata’s shareholders are Sonera (70%) and the Estonian Telephone Company (30%). As of end the of 1998, Esdata had 10 employees and offered the following services: access services to the Internet, WWW-page housing, server housing (facility management), DXXNET/FASTNET services (managed digital channels between clients' LANs or PBXs), the sale and rental of various modems and routers. DXXNET is an Estonian part of Finnish FASTNET, run by Sonera. As of mid-1998, there were 27 DXXNET nodes. EsData sells and rents high-speed base-band modems and Cisco routers. It is also the official distributor of Martis/Tellabs and an importer of Nokia modems.

• Netcom
  
  NetCom is a leading telecommunications company in Scandinavia. The company was formed in 1993. It is engaged in GSM using the brand names of Comviq and Tele2Mobil in Sweden, NetCom ASA in Norway and through its subsidiary Ritabell (Q GSM) in Estonia, in which it acquired a 90% stake in February 1999.

In the areas of public telecommunications, data communication services and Internet, NetCom operates Tele2 in Sweden, Tele2 A/S in Denmark and Tele2 Norge AS in Norway. NetCom also operates NätTeknik and Datametrix, specialising in systems integration, and Kabelvision, a Swedish cable TV services company. Through a 20% stake in BroadCo (Levicom Broadband), it is also involved in the Estonian CATV and internet access industries.

• Estonian Telecom (Eesti Telekom)

Estonian Telecom (ET) is a holding company with 51% controlling stakes in both the Estonian Telephone Company and the Estonian Mobile Telephone Company. The remaining 49% in each of the operators are held half by Finland’s Sonera and half by Sweden’s Telia. In early 1999, the government finalised a plan to privatise 49% of ET through an initial public offering (IPO). The IPO was 18 times oversubscribed and became the largest public equity deal ever in the Baltics, and the eighth largest ever in Eastern Europe. The next step in ET’s restructuring, which is still 51% owned by the state, is for Sonera and Telia to swap their 49% stakes in ETC and EMT for 46.5% of the holding company - a stake that could then be allowed to rise to 49%. This will entail changes to financial management, products and operations. After the restructuring and increases in capital, the state will see its stake diluted from 51% to 27.28%, with 23.72% held by public investors (from the IPO) and the remaining 49% held by Telia and Sonera.

• Other Providers

The number of global service providers in data communications/value-added services is limited. Global One offers SatLink and frame relay. The provider of Global One services in the three Baltic states is Estonian company TGK-Link AS, which also provides internet-related services to local banks and acts as the Estonian representative of Sprint USA. Infonet provides international connections to its X.25 private and virtual-private data networks.

Internet