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Telecommunications Policy

Telecommunications Policy 36 (2012) 222–236

0308-59

doi:10.1

n Corr

E-m

URL: www.elsevier.com/locate/telpol

Incumbency and market share within European mobiletelecommunication networks

Jason Whalley n, Peter Curwen

Department of Management Science, University of Strathclyde, Glasgow, UK

a r t i c l e i n f o

Available online 12 December 2011

Keywords:

EU

Mobile

Telecommunications

Incumbent

First mover advantages

61/$ - see front matter & 2011 Elsevier Ltd. A

016/j.telpol.2011.11.020

esponding author. Tel.: þ44 141 548 4546.

ail addresses: jason.whalley@strath.ac.uk, jaso

a b s t r a c t

The structure of mobile telecommunication markets varies considerably across Europe,

ranging from monopolies with a handful of subscribers to markets with five operators

and many millions of subscribers. Where competitive markets occur, there is also an

incumbent operator possessing substantial first mover advantages. This paper explores

these advantages, asking whether the incumbent has remained the largest operator as

the market has developed. This question is investigated using data from 49 European

countries. The analysis finds that in most countries the incumbent continues to be the

largest operator measured by market share. In some countries, later entrants into the

market have struggled to gain market share, contributing to the highly concentrated

nature of many mobile markets. The extent to which the geographical footprint of an

operator influences its market share is also examined.

& 2011 Elsevier Ltd. All rights reserved.

1. Introduction

Throughout the world, most countries have liberalised their telecommunications markets. As a result, competition hasbeen introduced into markets with all that this entails. As a consequence of this competition, new technologies andservices have been developed, prices have fallen and mobile telecommunications have reached an ever-larger share of thepopulation. Although these benefits have been, and remain, significant, the development of competition in mobile marketshas taken longer than many expected, with the first operator to launch often retaining a significant portion of the marketlong after it has been joined by two or three other operators.

While there are several reasons why incumbents have continued to dominate mobile markets, it has been argued thatthey posses significant first-mover advantages that later entrants have found difficult to overturn (Bijwaard, Janssen, &Maasland, 2008; Whalley & Curwen, 2006). Given these advantages and the well-documented difficulties that some laterentrants have experienced, an interesting question to ask is in how many markets is the incumbent still the largest mobiletelecommunication operator? In contrast to previous research that has relied on a small sample size (for example,Bijwaard et al., 2008) or sought to explain developments within a single country (for example, Liu, Chou, Wu, & Shih,2009), this article asks whether the incumbent mobile operator is still the largest across 49 countries in a broadly definedEurope.

With this in mind, the remainder of this article is structured as follows. In the following section, the relevant literaturein two areas is discussed. The first of these areas identifies the advantages associated with being a first-mover in general,whereas the second examines previous research relating to first-mover advantages within the telecommunications

ll rights reserved.

n@mansci.strath.ac.uk (J. Whalley).

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236 223

industry. In Section 3, the sample and methodology adopted is outlined while in Section 4 the analysis is undertaken.The analysis is divided into two parts, covering firstly whether incumbents have remained the largest operator in theirrespective markets and, secondly, whether it is possible to discern any market share benefits from operating in contiguousmarkets. Conclusions are drawn in Section 5, and areas for future research are suggested.

2. Literature review

This section presents the relevant literature in two areas. In the first sub-section, the focus is on first-mover advantageswith the literature drawing on a range of markets. By drawing on a broad array of literature, this first sub-sectionhighlights the scope of first-mover advantages that have been observed and the difficulties encountered by later entrantsinto various markets. In the second sub-section, the focus switches to the telecommunications industry. Afterdifferentiating between the two different categories of first-mover that are observable within the telecommunicationsindustry, the remainder of the sub-section recounts the relevant literature. This literature addresses the timing of entry,highlighting the challenges that later entrants encounter in mobile telecommunication markets.

2.1. First-mover advantages

The advantages that arise from being the first into a particular market have been discussed in the literature—see, forexample, Kerin, Varadrajan, and Peterson (1992), Lieberman and Montgomery (1988, 1998), Urban, Carter, Gaskin, andMucha (1986) and Stickel (2001). Lieberman and Montgomery (1988, p. 41f) identified three different types of first-moveradvantages: technological leadership, pre-emption of assets and buyer switching costs. With regard to technologicalleadership, they identified two different types of first-mover advantage. One advantage was based on the learning thatoccurred over time, while the second was based on the research and development (R&D) that companies undertook.As companies learned how to produce their products more efficiently or to use feedback from the market to enhance theseproducts, barriers to entry were created that sustained the competitiveness of the first-mover.

This competitiveness could also be sustained through the use of patented technology, although this was largelydetermined by the extent to which a company had engaged in R&D. Interestingly, Lieberman and Montgomery (1988)drew attention to patent races and the reasons why these were not winner takes all occurrences and were limited to just ahandful of industries. In practice, patents could be circumvented and provided only temporary advantages due to the paceof technological change.

Another set of first-mover advantages arose from the ability of one company to acquire scarce assets before its rivals.As a result of being better informed than its rivals, the first-mover could acquire natural resources or property before itsrivals (Lieberman & Montgomery, 1988, p. 44). First-movers might also be able to squeeze out their rivals by targeting themost profitable parts of the market in terms either of geography or market niche. If the products were similar, laterentrants could also be deterred from entering market niches by the threat of price competition. Market entry might also bedeterred where the first-mover pre-emptively invested in plant and equipment, with the resulting larger productivecapacity then being used to enable it to compete on price. Stickel (2001) also drew attention to the importance ofinformation, albeit within the context of a duopoly with homogenous products. The better informed company coulddetermine whether first-mover advantages existed, and thus whether or not to invest in the market.

Switching costs and buyer uncertainty also provide companies with first-mover advantages. Lieberman andMontgomery (1988, p. 46) identified a broad range of switching costs, with their presence requiring subsequent entrantsto invest additional resources in order to attract customers away from the first-mover. In contrast, in attempting toovercome brand loyalty, later entrants needed either to possess a superior product or to advertise more frequently orcreatively than the first-mover.

Drawing on several studies, Kerin et al. (1992) identified a range of first-mover advantages that were similar to thosesuggested by Lieberman and Montgomery (1988). However, they questioned the extent to which these were achievable inpractice. For example, they suggested that there were cost and differentiation advantages associated with being the first-mover but that these depended on the first-mover’s management making the appropriate investment decisions. If thefirst-mover needed to invest in equipment to gain the advantage, but was unlikely to do so in the face of uncertainty overfuture demand, this uncertainty might prevent the first-mover’s management from making the appropriate investment,thereby denying the company its first-mover advantages.

Another reservation expressed by Kerin et al. (1992) was the extent to which the first-mover’s cost advantage wasinfluenced by whether it had engaged in related or unrelated diversification. If the first-mover had engaged in relateddiversification it would enjoy economies of scope, which it would not do if it had engaged in unrelated diversification. Inother words, there were cost advantages associated with related diversification. While Kerin et al. (1992, p. 45) argued thatproprietary technological innovations did provide first-movers with an enduring competitive advantage, they went on tostate that this was not the case for other innovation sources. Moreover, major changes in technology might work againstfirst-movers burdened with large investments in old technologies.

Drawing on consumer product data from the United States, Urban et al. (1986) investigated whether market sharebenefits accrue from being first into a market. They found that although the market share of the pioneering brand doesdecline as other brands enter the market, there are still market share benefits associated with being first into the market.

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236224

Interestingly they found that as the number of entrants increased, the penalty associated with later entry into the marketdeclines as market shares are increasingly determined by advertising and positioning (Urban et al., 1986, p. 655). Oneaspect of positioning is product features, while another is price. Later entrants can gain market share by competing onfeatures and/or price, while the pioneering brand can defend its position by developing appropriate strategies in one orboth of these areas.

Brown and Lattin (1986) extended the analysis undertaken by Urban et al. (1986) by including data relating to theregional rollout of brands within a single product category. They found that a brand lost market share to a rival throughnot following it swiftly into regional markets (Brown & Lattin, 1986, p. 1367). Moreover, while their analysis does suggestthat the lagging brand is able to recover partially the lost market share, this is a slow process. In turn, Huff and Robinson(1994) draw on Brown and Lattin (1986) and Urban et al. (1986) in their analysis of the impact that lead-time andcompetitive rivalry have on market share. They found that whether new entrants were able to overturn the market shareadvantages of the first company to enter the market was partly determined by the age of the market. In older markets, thelead-time enjoyed by the first entrant was substantially larger than in younger markets. Furthermore, in older markets themarket share of second entrants was found to have caught up with, but not surpassed, the pioneering company (Huff &Robinson, 1994, p. 1376). The market share of the third and fourth entrants reflected the relative ordering of entry into themarket. In contrast, in younger markets, the market share of the second entrant had not caught up that of the pioneeringcompany.

Whereas Kerin et al. (1992) questioned the extent to which first-mover advantages exist, other authors have chosen tohighlight the existence of first-mover disadvantages. For example, later entrants will benefit from the market-making effortsof the first-mover in terms both of creating the market as well as resolving technological uncertainties (Lieberman &Montgomery, 1988, p. 47). New entrants may exploit technological changes as they compete against the first-mover but, bydrawing on Scherer (1980) and Lieberman and Montgomery (1988) suggested that this was not as one-sided as was impliedgiven that there were examples of first-movers proving themselves to be aggressive followers of technological change. Inother words, the incumbent waited until the later entrants demonstrated the viability of the technology before aggressivelyadopting the technology itself.

The first-mover might also suffer from inertia (Lieberman & Montgomery, 1988): it might suffer from asset specificityor be reluctant to cannibalise its existing product and revenue sources. Inertia might also arise due to the first-mover’sorganisational structure as well as the inability of its management to identify and assess the challenges that it faced.Managerial issues were also touched on in the Gannon, Smith, and Grimm (1992) discussion of first-mover activity withinthe domestic US airline industry. They found that those airlines engaging in first-mover activities were led by bettereducated but less experienced senior management than those that did not.

The extent to which first-mover advantages exist is one of the issues that were discussed in Methe’s (1992) study of thedynamic random access market (DRAM) segment of the integrated circuit market. He found that first-mover advantageswere enjoyed within each DRAM product innovation but not between the innovations, with each new innovation offering awindow of opportunity to those lagging behind in the industry to make up ground on the market leaders. Indeed, many ofthe large companies that emerged in the industry were unable to maintain their position as innovators from onegeneration of products to the next. As a consequence, it was not necessarily the case that the first entrant into the marketremained the innovator.

Coeurderoy and Durand (2004) explored the relationship between what they described as early mover advantage andthe company’s market share. Early movers were innovators that create the rules of the game for subsequent entrants, andas such included more companies than just the first one in their analysis to enter the market. They drew on a sample ofjust over 1000 French manufacturing companies in seven industries to ascertain the advantages that companies gainedfrom being early movers. Based on their analysis of the seven industries investigated, they suggested that entry order didinfluence market share, with earlier entry being associated with higher market share.

In summary, there are clear and substantial advantages associated with being first into a market. Through developingthe market, the pioneering company is able to strengthen its competitive position so that it continues to be the largestcompany measured by market share even after several other companies have entered the market. For later entrants to beable to match, and perhaps surpass, the market share of the pioneer, their products will need contain more features and/orbe cheaper than those of the first company to enter the market.

2.2. Telecommunications

Within the telecommunications industry, it is possible to distinguish between two categories of first-mover. One categoryis fixed-wire, where operators normally started life in public ownership, and the second is mobile where operators werelicensed from the mid-1980s onwards and were frequently owned by the fixed-wire incumbent. The term ‘incumbent’ can beused in relation to both categories of first-mover although the precise meaning of the term is not identical.

The strategies of both fixed-wire and mobile incumbents have been extensively researched. A considerable proportion ofthis research has examined incumbent strategies within the context of liberalisation and the development of competition(see, for example, Bohlin & Granstrand, 1994; Eliassen & Sjøvaag, 1999; Johnson & Turner, 2007). In respect of coverage ofother issues, the detailed case studies of operators, both fixed-wire and mobile, in Curwen and Whalley (2004) are unusual,with a more typical approach being that of Stienstra, Baaij, van den Bosch, and Volberda (2004) or Turner (2005).

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236 225

The latter both explore the strategies of incumbent European operators that operate in fixed and mobile telecommu-nication markets. In contrast, Bijwaard et al. (2008) focused on mobile incumbents when analysing early moveradvantages in 16 countries. They found that early entry into a market was better than later entry, and that it was moredifficult to enter a concentrated market. As a result, later entrants often found it difficult to increase their market sharewhen competing against well-entrenched rivals. They suggested that those governments intending to create a levelplaying field between operators needed to give careful consideration to the timing of licence issue to new entrants.Although Fernandez and Usero (2009) did not explicitly examine mobile incumbents, their conclusion that pioneers andfollowers should follow different strategies was implicit within the analysis of Bijwaard et al. (2008).

Liu et al. (2009) examined the changes that had occurred in the Taiwanese mobile sector. Over a period of five years,Chunghwa Telecom, the incumbent operator, had ceded the leadership of the market to Taiwan Cellular. Their analysishighlighted how the incumbent’s ability to compete against its rival was limited by regulatory and budgetary constraints.While the regulatory restraints were to be expected, the role played by budgetary constraints was unusual. As theincumbent was state-owned, it was subject to Taiwan’s Budget law which required it to present details of its own budget ayear in advance and which limited what it could do. As a result, the ability of the incumbent to respond freely to marketcompetition was lost. For example, Chunghwa Telecom could not offer free handsets with the consequence that it wasunable to attract new subscribers and hence lost market share.

Several countries have sought to increase competition in mobile markets by issuing third-generation (3G) licences inexcess of the number of second-generation (2G) incumbents. However, this has proved difficult to deliver. Whalley andCurwen (2006) outlined the difficulties experienced by Sonera, Telefonica and France Telecom/Orange as they attemptedto expand into new markets through 3G licensing. Only Hutchison Whampoa, which trades as 3, has emerged as asignificant 3G-based new entrant in Europe. Funded by the extensive resources of the parent company, HutchisonWhampoa’s subsidiaries have been able to enter a handful of countries although they remain relatively small players inthese markets (Curwen & Whalley, 2010). This small subscriber base limits Hutchison Whampoa’s ability to achieve scaleeconomies, and it is further disadvantaged by the contradictory pressures of handset subsidies and the need to competevia low prices. Given the challenges of growing a mobile subscriber base from scratch in the face of competition from 2Gincumbents, it is perhaps no surprise that Hutchison Whampoa has been able neither to float its various operations asplanned nor exit from one or more of its markets, either through a merger or closure of its operations.

Finally, Atiyas and Dogan (2007) charted the development of competition in the Turkish mobile market. Their analysissuggested that the timing of entry was important, with significant first-mover advantages being observed. Theseadvantages accrued from the wider geographical coverage of the initial operator as well as its larger subscriber base,both of which tended to increase while awaiting the entry of the second operator into the market. If the second operatorentered the market several years after the first, the advantages that accrued were such that it found it very difficult tocompete effectively for subscribers. Naturally, one way to offset these advantages would be to develop and thenimplement an appropriate regulatory framework. As noted by the authors, not only would such a framework tend to bequite diverse, covering a range of issues such as interconnection, roaming and number portability, but it would also bedifficult to implement.

From the aforementioned literature, there would appear to be clear first-mover advantages within mobile telecom-munication markets. The literature shows that, in many cases, later entrants into mobile markets have struggled to gainmarket share, with the case of Taiwan being unusual as the incumbent was limited in its competitive responses by aunique set of circumstances. With this in mind, it is possible to suggest the following research question that will beaddressed in the remainder of the paper:

RQ1—have incumbent mobile operators remained the largest company by market share?

As noted above, Brown and Lattin (1986) found that a brand lost market share to a rival if it did not swiftly follow it intoother regional markets. Drawing on this, it is possible to suggest a second research question that reflects the advantagesthat are said to accrue from operating in contiguous markets, namely:

RQ 2—has the entry of mobile operators into contiguous markets helped them retain market share?

3. Data

From Dorrenbacher (2000), Curwen and Whalley (2006) and Gerpott and Jakopin (2005) it is possible to identify a rangeof different measures through which the performance of mobile operators could be assessed. Dorrenbacher (2000)suggested turnover and operating income, while Curwen and Whalley (2006) identified the number of subscribers andcountries in which the mobile operator is present as appropriate measures of internationalisation. Through adopting thesetwo measures, they were able to include 38 companies in their analysis. In contrast, only 14 European companies wereincluded in the analysis of Gerpott and Jakopin (2005) due to their use of a financial measure of internationalisation intheir analysis. Moreover, while Gerpott and Jakopin (2005) included a seven-year run of data (1997–2003) a much longertimeframe can be found in Bijwaard et al. (2008), namely from 1990 to 2006.

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The differences in scope that are evident between Bijwaard et al. (2008), Curwen and Whalley (2006) and Gerpott andJakopin (2005) reflect the problem that mobile operators do not provide a consistent amount of operational and financialinformation. Some operators provide detailed information that enables the operational and financial performance ofindividual operations to be ascertained, while others consolidate their operations together by region or according to theextent of their equity holding. As a consequence, there is an inevitable tension between coverage and detail—to includemore companies or countries within the analysis requires compromises to be made regarding which variables are to beincluded and the granularity of the data. Such a compromise can be found within this article. As a consequence of thedesire to include a wider range of countries and mobile operators than Bijwaard et al. (2008) or Gerpott and Jakopin (2005)in the analysis of the relationship between first-mover advantages and market share, financial data are not included.Moreover, by including a longer timeframe it is possible to observe the impact that 3G has had on market share.

Like Bijwaard et al. (2008), Fuentelsaz, Maıcas, and Polo (2008) and Wu and Chu (2010), market share (subscriber) datais used in the analysis. Before how the data was collected is outlined, it is necessary to note that it has been implicitlyassumed that mobile operators seek to maximise their subscriber base and thus, in turn, their share of the market within aparticular country. It is, however, conceivable that an operator may make the strategic decision to focus on one particularcustomer type over another, or alternatively to maximise revenues or returns rather than subscriber numbers. In the UK,for example, it is arguably the case that Vodafone initially favoured business over residential consumers while the oppositewas true for One-2-One (which subsequently became T-Mobile and then Everything Everywhere). A case can also be madeout that the strategic focus of both of these operators has changed over the years, such that they no longer favour one partof the market over another. While such anecdotal arguments exist regarding the strategic choices made by operators,information collected in a systematic fashion for all of the operators in the sample, over the timeframe covered by themobile subscriber (market share) data, is not available.

The data for this paper are drawn from a variety of sources. The starting point is Global Mobile, which publishes mobilesubscriber figures on a quarterly and annual basis arranged by operator. It also provides information on the technologyused by each operator as well as the date that it launched each service. The data provided are comprehensive, covering 49countries across a broadly defined Europe, and are available over a lengthy run of years.

In this article, Europe is defined as encompassing the European Union (EU) and European Free Trade Area (EFTA) alongwith those countries having some form of independent government within a post-Communist understanding of Europe.Russia has been excluded because so much of its land is located outside Europe and it has many regional operators, whichis not the norm elsewhere in Europe, while Kosovo has been excluded as some EU member states do not accept itsindependent status (Curwen & Whalley, 2008).

As a consequence of the manner in which Global Mobile presents its data, it is possible to identify almost 500 entriesacross the 49 countries in the sample. Most of these are duplicate entries due to changes in the name of operators ordifferences in one of the variables – number of subscribers, date of launch and technology use – that are reported. Bycomparing Global Mobile with Curwen and Whalley (2004, 2008), which summarised the same data collectedindependently by the authors, duplicate entries were removed with the consequence that the number of entries declinedto just over 320. As the use of a specific technology by a specific operator in a specific country was treated as anindependent entry, an individual operator frequently ended up with multiple entries within one country. Accordingly, thedata were further consolidated so that one entry per operator in each country was reported. This resulted in 175 mobileoperators being identified across the countries included in the analysis. This was further reduced to 168 by the exclusion ofthose operators using CDMA technology as they are not directly comparable with the vast majority of operators that useGSM as their second-generation technology and W-CDMA (otherwise known as UMTS) as their third-generationtechnology. It is worth noting that in Europe, CDMA is frequently provided in the 450 MHz band, which is never usedfor GSM, and that roaming is extremely limited so subscriber numbers tend to be low.

The comparison of data collected by Curwen and Whalley – which are continually updated and as an annual datumcurrently covers the period to end-2010 – and that by Global Mobile brought to light significant discrepancies regardingthe dates on which mobile operators launched their services. Initially, Global Mobile reported licensing dates, butsubsequently switched to launch dates while neglecting to define the exact meaning of a launch. In contrast, Curwen andWhalley (2008) defined a launch as the date when services were first made available either to business users or the public,with the consequence that their dates were often different from those cited by Global Mobile. It should also be noted thatsince some of the operators contained in Global Mobile have subscriber numbers combined across two technologies,analogue (1G) and 2G, whereas Curwen and Whalley (2008) do not take account of 1G launch dates, neither sourceprovides comprehensive and reliable coverage of launch dates across all three generations of mobile technologies. Inessence, Curwen and Whalley (2008) data are more internally consistent and reliable (although it has to be said that thedefinition of a launch date remains controversial), but they no longer see any useful purpose in separating out 1G, evenretrospectively, while Global Mobile data are more comprehensive but less reliable. To ensure maximum coverage, Curwenand Whalley data are used for 2G and 3G launch dates, and Global Mobile for 1G.

4. Analysis

This section will focus on two issues that arise from the literature review in Section 2. The first of these is whether theadvantages that accrued to the mobile incumbent as first-mover were such that it remained as the largest operator by

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236 227

market share at the end of 2009. The second issue is whether there are advantages associated with mobile operatorscreating footprints of contiguous investments.

4.1. Incumbents and first-movers

The starting point of the analysis is Table 1. For each of the countries in the sample, the table identifies the fixed-wireand mobile incumbents as well as the other mobile operators at the end of 2010. The first observation that can be made isthat competition was present in all but four of the 49 countries in the sample. Of the 45 countries where there was morethan one operator, 32 countries had either two or three active operators.

In contrast, there were 14 countries with four or more mobile operators. That there were four operators in Germany isunsurprising given its population of around 80 million. What may be surprising is that Austria, a country with a muchsmaller population of roughly eight million, also had four operators. There were also four operators in Liechtenstein, acountry with a population of just 35,000, although in this case its geographical position had encouraged network extensionfrom neighbouring countries given that the investments involved were relatively modest.

Both the Ukraine and the United Kingdom had five operators at the end of 2009, although in the latter case thissubsequently declined with the merger of T-Mobile and Orange (to become Everything Everywhere). After several monthsof speculation, Deutsche Telekom announced that it had agreed to merge its UK operations with those of Orange (DeutscheTelekom, 2009). This merger, which was completed in early 2010 (Mobile News Direct, 2010), reduced the number ofoperators from five to four. It is worth noting, however, that the newly merged company is somewhat larger than O2

(Telefonica) or Vodafone and many times larger than Hutchison (branded as ‘3’). The Ukrainian market is also in theprocess of consolidation although, as per usual, the process has ended up in the law courts (TeleGeography, 2010).

There were also five operators in The Netherlands as recently as 2004, but since then consolidation has reduced thenumber of operators to three. In April 2003, the then mmO2 was sold to Greenfield Capital Partners who in turnsubsequently sold the company to KPN in June 2005 (Curwen & Whalley, 2004; Greenfield Capital Partners, 2005). Partlydue to its strategy of focusing on markets where it was the first- or second-largest operator, Orange sold its Dutchoperations to T-Mobile for h1.3 billion in 2007 (Deutsche Telekom, 2007). Thus, as of mid-2011, only Ukraine retainedmore than four active operators, which varied considerably in size from less than two million subscribers at the end of2010 to more than 24 million.

The second observation that can be made is that for 31 countries the first mobile operator to launch is currently ownedby the fixed-wire incumbent. A related observation is that in 32 countries the incumbent mobile operator is currently thelargest operator in terms of subscribers. Within a large number of these countries, 22 in all, the largest operator hasadvanced through at least three successive generations of mobile technologies. This would appear to reinforce theargument that there are significant advantages from being the first-mover in a market. However, a closer examination ofthe market shares of operators is revealing. In Germany, for example, the gap between the incumbent operator, T-Mobile,and the second-largest operator has fluctuated over the years. For all but four years of the period under study, T-Mobile,the incumbent, has been the largest operator in the market. Unusually, in 1998, the market share of T-Mobile andVodafone was the same, though in the subsequent two years Vodafone managed to edge ahead of T-Mobile to become thelargest operator. Since 2000 the market position of these two operators has been reversed with just one exception, namely2004. Since then, T-Mobile has been the largest operator with a margin over Vodafone that appears to be wideningover time.

In Italy the incumbent, Telecom Italia, has always been the largest operator. In 1997 Telecom Italia was more than twiceas large as its only rival, Vodafone. This margin has declined as other operators have entered the market and thepenetration rate has increased. From a peak in 2007, the number of subscribers controlled by Telecom Italia has steadilydeclined, thereby reducing its margin over Vodafone, the second-placed operator. Interestingly, the number of subscriberscontrolled by Hutchison (branded as ‘3’) also appears to have peaked in 2007. As a result of these various changes TelecomItalia is currently the largest operator, closely followed by Vodafone with Wind – which effectively became bankrupt andrecently changed hands – steadily losing ground. For its part, ‘3’ is much smaller than Wind and hence it is a minor playerin the Italian market.

In Macedonia, T-Mobile has been the largest operator throughout the period under investigation. Cosmofon, nowowned by Telekom Slovenije, was the second operator to launch in 2003, and Telekom Austria (branded as ‘Vip’) the thirdin 2007. The launch of the third operator does not appear to have affected T-Mobile’s ability to attract new subscribersgiven that it has generated subscriber growth every year since Telekom Austria entered the market (although the yearlysubscriber increases are admittedly lower than was previously the case). Instead, Telekom Austria appears to be growingat the expense of Cosmofon, which saw its subscriber base decline between 2008 and 2009 by an amount equal to theentire subscriber base of the third-placed operator. A similar story of a third entrant into the market affecting the secondentrant more than the incumbent can also be observed in Malta, where the incumbent (Vodafone) has continued to growwhile Mobisle, the second-placed operator, has lost subscribers.

In several countries there is a significant size gap between the largest (the incumbent) and the second-largest operator.One such country is Spain, while another is Sweden. In the case of Sweden, the incumbent TeliaSonera is roughly equal insize to Tele2, the second-placed, and Telenor, the third-placed operator, combined. In Switzerland, Swisscom, theincumbent, is much larger than TDC and Orange combined. In other words, the Swiss market is skewed in favour of the

Table 1European telecommunication operators, 31 December 2010.

Source: Compiled by the authors from a variety of sources.

Country Operator

Fixed-wire

incumbent

Mobile operator(s) launched prior to 31/12/2010

and using GSMa

Rank order of mobile operators by number

mobile subscribers on 31/12/2009, from largest

to smallest.Incumbent

operator(s)b

Other operator(s)

Albania Albania Telecom AMC (OTE) Eagle Mobilec, Vodafone AMC4Vodafone4Eagle Mobile

Andorra Andorra Telecom Andorra Telecomc – –

Austria Telekom Austria Telekom Austriac Hutchison (3G), ONE, T-Mobile Telekom Austria4T-Mobile4ONE4Hutchison (3G)

Belgium Belgacom Belgacomc KPN, Orange Belgacom4Orange4KPN

Bosnia-

Herzegovina

BH Telecom GSM BiHc HT MK, Mobilna Srpske GSM BiH4Mobilna Srpske4HT MK

Bulgaria Vivacom Telekom Austria OTE, Vivacomc Telekom Austria4OTE4Vivacom

Croatia T-Hrvatski

Telekomikacijie

T-Mobilec Tele2, Telekom Austria T-Mobile4Telekom Austria4Tele2

Cyprusd CyTA CyTAc MTN CyTA4MTN

Czech Rep. Cesky Telecom Telefonicac T-Mobile, Vodafone T-Mobile4Telefonica4Vodafone

Denmark TDC TDCc Hutchison (3G), Telenor,

TeliaSonera

TDC4Telenor4TeliaSonera4Hutchison (3G)

Estoniae Eesti Telefon TeliaSonerac Elisa, Tele2 TeliaSonera4Tele24Elisa

Faroe Islands Føroya Telecom Føroya Telecomc Kall-GSM Føroya Telecom4Kall-GSM

Finland TeliaSonera TeliaSonerac DNA, Elisa Elisa4TeliaSonera4DNA

France France Telecom Orangec Bouygues Telecom, SFR Orange4SFR4Bouygues Telecom

Georgiaf JSC United Georgian

Telecommunications

TeliaSonera Magti, VimpelCom TeliaSonera4Magti4VimpelCom

Germany Deutsche Telekom T-Mobilec KPN, Telefonica, Vodafone T-Mobile4Vodafone4KPN4Telefonica

Gibraltar Gibraltar Telecom Gibraltar Telecomc – –

Greece OTE Wind OTEc, Vodafone OTE4Vodafone4Wind

Greenland TeleGreenland TeleGreenlandc – –

Guernsey Guernsey Telecom C&Wc Bharti Airtel, Wave Telecom C&W4Wave Telecom4Bharti Airtel

Hungary Matav T-Mobilec Telenor, Vodafone T-Mobile4Telenor4Vodafone

Icelandg Siminn Siminnc Nova (3G), Vodafoneh Siminn4Vodafone4Nova (3G)

Ireland Eircom Vodafone eircomc, Hutchison (3G),

Telefonica

Vodafone4Telefonica4eircom4Hutchison

(3G)

Isle of Man Manx Telecom HgCapital/CPSc,i C&W, Wire9 HgCapital/CPS4C&W4Wire9

Italy Telecom Italia Telecom Italiac Hutchison (3G), Vodafone,

Weather

Telecom

Italia4Vodafone4Weather4Hutchison (3G)

Jersey Jersey Telecom Jersey Telecomc Bharti Airtel, C&W Jersey Telecom4Bharti Airtel4C&W

Latvia Lattelekom TeliaSonerac Bite, Tele2 Tele24TeliaSonera4Bite

Liechtenstein Telecom

Liechtenstein

TeleNet Belgacom, Orange, Telekom

Austria

Belgacom4Orange4Telekom

Austria4TeleNet

Lithuania Lietuvos Telekomas TeliaSonerac Bite, Tele2 TeliaSonera4Tele24Bite

Luxembourg P&T Luxembourg LuXcommsc Belgacom, P&T Luxembourg LuXcomms4Belgacom4P&T Luxembourg

Macedonia Makedonski

Telekomunikacii

T-Mobilec Telekom Austria, Telekom

Slovenije

T-Mobile4Telekom Slovenije4Telekom

Austria

Malta Maltacom Vodafone Melita Mobile (3G), Mobislec Vodafone4Mobisle4Melita Mobile (3G)

Moldova Moldtelecom Orange Eventis, Moldcell, Moldtelecom

(3G)c

Orange4Moldcell4Eventis4Moldtelecom

(3G)

Monaco Monaco Telecom Monaco Telecomc – –

Montenegro Crnogorski Telekom Telenor M:tel, T-Mobilec T-Mobile4Telenor4M:tel

Netherlands KPN KPNc T-Mobile, Vodafone KPN4T-Mobile4Vodafone

Norwayj Telenor Telenorc Mobile Norway, TeliaSonera Telenor4TeliaSonera4Mobile Norway

Polandk TPSA Orangec Aero2, CenterNet, Mobyland,

Netia P4, PTC, Vodafone

Vodafone4Orange4PTC4Netia P4l

Portugal Portugal Telecom Portugal Telecomc Vodafone, Optimus Portugal Telecom4Vodafone4Optimus

Romania RomTelecom Vodafone Orange, OTEc, RCS&RDS Orange4Vodafone4OTE4RCS&RDS

Serbia Telekom Srbija Telenor Telekom Austria, Telekom Srbijac Telekom Srbija4Telenor4Telekom Austria

Slovakia Slovenske

Telekomunikacie

T-Mobilec Orange, Telefonica Orange4T-Mobile4Telefonica

Slovenia Telekom Slovenije Telekom Slovenijec Telekom Austria, Tus, T-2 (3G) Telekom Austria4Telekom Slovenije4Tus4T-

2 (3G)

Spain Telefonica Telefonicac Orange, Vodafone, TeliaSonera

(3G)

Telefonica4Vodafone4Orange4TeliaSonera

(3G)

Sweden TeliaSonera TeliaSonerac Hutchison (3G), Tele2, Telenor TeliaSonera4Tele24Telenor4Hutchison (3G)

Switzerland Swisscom Swisscomc Orange, CVC Capital Partners Swisscom4CVC Capital Partners4Orange

Turkey Turk Telekom Turkcell Aveac, Vodafone Turkcell4Vodafone4Avea

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236228

Table 1 (continued )

Country Operator

Fixed-wire

incumbent

Mobile operator(s) launched prior to 31/12/2010

and using GSMa

Rank order of mobile operators by number

mobile subscribers on 31/12/2009, from largest

to smallest.Incumbent

operator(s)b

Other operator(s)

UK BT Telefonica, Vodafone Hutchison (3G), Orange, T-Mobile Telefonica4T-Mobile4Vodafone4Orange4Hutchison (3G)

Ukraine Ukrtelecom MTS Astelit, Kyivstar, Ukrtelecom

(3G)c, VimpelCom

Kyivstar4MTS4Astelit4VimpelCom4Ukrtelecom (3G)

a Mobile operators – which all have national licences – are identified in accordance with a methodology unique to the research conducted by Curwen

and Whalley. The purpose is to make it as easy as possible for readers to identify common parentage of networks where the parent controls its

subsidiaries. In the case of national incumbents, the name used is either that of the parent, such as Telenor or TeliaSonera, or that of the brand used across

all of its networks, such as T-Mobile (rather than Deutsche Telekom) or Orange (rather than France Telecom) where the association of parent and brand is

common knowledge. However, if the brand is used where the parent is very much a minority shareholder (as in the case of Orange in Austria) and the

major shareholder is not a telco, the network name is used to signify lack of parental control. In some cases, such as ‘3’, which is the brand used

everywhere in Europe by ultimate holding company Hutchison Whampoa, the parent’s name is preferred because ‘3’ is nowhere a 2G incumbent. In yet

other cases, usually in small countries/islands, neither the parent’s name nor the brand will be familiar and the parent’s name is used for consistency.

Although less than perfect, this methodology is much clearer than that used elsewhere.b First operator to launch in markets with two or more operators present.c Part of the same group as fixed incumbent.d There are two operators listed based in South Cyprus. In addition, in North Cyprus, are to be found Kibris Telekomvia and KKTCell, but these are

treated as regional subsidiaries of parents Telsim and Turkcell respectively.e 3G new entrant Bravocom had not yet launched.f 3G new entrant Telecom Invest had not yet launched. Aquafon and A-Mobile operate only in the disputed Abkhazia region.g IMC Iceland is operational but only serves a niche market. Amitelo and IceCell had not yet launched.h Although Vodafone does not hold an equity stake in Vodafone-Iceland, the company was rebranded from Og-Vodafone to Vodafone-Iceland in

October 2006 by its then owners. The company is now owned by Teymi, an Icelandic IT company but is universally reported in the media as Vodafone

which is accordingly preferred here (as an exception).i Manx Telecom was sold by Telefonica to HgCapital/CPS in June 2010.j MTU T3 and Hutchison (3G) had not yet launched.k Tele Kolejowa had not yet launched.l At the end of 2009, Aero2, CenterNet and Mobyland had not yet launched their operations.

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236 229

incumbent. A lopsided market can also be observed in Turkey, where Turkcell (the incumbent) has around six million moresubscribers than the other two operators (Vodafone and Avea) combined.

It is also the case that, for 13 countries in 2009, the incumbent operator was no longer the largest operator. In Bulgariaand Lithuania, for example, the incumbent operators’ services were based only on first-generation (1G) mobiletechnology—that is, they did not subsequently introduce second- or third-generation technologies. As such, their relativeposition in the market declined over time as later operators began to deliver their services using 2G. As they did notintroduce 2G-based services, they eventually exited the marketplace. Liechtenstein is unusual in that the later entrantsdominate the market place, with the incumbent being the smallest of the four operators that are present in the country.

In a handful of countries the gap between the incumbent and the largest operator is quite small. In Latvia, for example,the gap between LMT (incumbent) and Tele2 (largest operator) was just 40,000 subscribers at the end of 2010. Similarly,the gap in Romania between Vodafone (incumbent) and Orange (largest operator) and in Poland between Orange(incumbent) and Plus (largest operator) is relatively small in relation to the absolute size of these two operators. Incontrast, the gap between the incumbent and largest operator in some countries is relatively large. In Serbia the incumbentis Telenor, while Telekom Srbija is the largest operator. Telekom Srbija is almost twice as large as Telenor, which in turn istwice as large as Telekom Austria (branded as ‘Vip’). In Slovakia, the gap between T-Mobile (incumbent) and Orange(largest) is almost equivalent to the subscriber base of the third operator, Telefonica.

As a direct consequence of liberalisation, the market share of incumbents has invariably fallen. Fig. 1 charts the marketshare of incumbent operators at the end of 2009. Fig. 1 indicates clearly that, in the majority of the 45 countries in thesample where competition has been introduced, the incumbent’s share of the market is now below 50%. However, this isslightly misleading since, in 17 of the 33 countries where the incumbent controls less than half of the market, its marketshare is located somewhere in the 40–50% range. In other words, the incumbent controls just under half of the market.Given the distribution evident in Fig. 1, it is arguably the case that the norm for incumbent market share after several yearsof liberalisation lies between 30% and 60%.

Depending on the nature of the liberalisation process and the degree of competition, the loss of market share for someincumbents has been sharp and swift while for others it has been slow and protracted. Illustrative examples of this declineare shown in Fig. 2. As can be observed, Vodafone in the UK has gradually lost market share throughout the period understudy, but this comes as no surprise when it is remembered that by 1994 there were already four second-generation (2G)

0

2

4

6

8

10

12

14

16

18

0s 10s 20s 30s 40s 50s 60s 70s 80s 90s

Fig. 1. Distribution of incumbents by market share, 31 December 2009.

Source: Compiled by the authors from a variety of sources.

Fig. 2. Illustrative examples of declining market share, 1990–2009.

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236230

operators in the market. In contrast, a sharper decline in market share is observable in Ukraine where MTS rapidly lostmarket share as other operators entered the market. It is worthy of note, given that this phenomenon can be observed inmany other countries, that although its market share declined its subscriber base simultaneously grew as the penetrationrate and hence the overall size of the market increased.

A handful of incumbents have been able to reverse their decline and regain market share. In all, it is possible to identifyseven incumbents that have managed this feat, although a closer examination of their market share trend suggests that thetotal may be rather smaller. In Austria, Telekom Austria has begun to regain market share from a low point in 2006,although the handful of years that has since passed and the subsequent fluctuation in its market share suggests that it maytoo early to tell whether or not its reversal of fortune is permanent or not. A degree of caution is also required in two othercases, T-Mobile in Croatia and C&W in Guernsey. While both of these incumbents have begun to regain market share, toofew years have passed to say whether or not this change is permanent.

4.2. Contiguous markets and market share

Clear differences exist across the 49 countries of the sample. Roughly one-half of the countries in the sample aremembers of the EU, while others are hoping to join, and a few are members of the European Free Trade Association. It is nosurprise, therefore, that differences also exist across the sample when it comes to the international investment strategiesof mobile operators.

Curwen and Whalley (2008) showed that the internationalisation focus of operators, as demonstrated by the number ofsubscribers and investments held, varied considerably at the end of 2007. Some operators such as France Telecom could bedescribed as bipolar when the location of their investments was taken into account. Although the company had madeinvestments around the globe, more than half of its investments could be found in two regions, namely Western Europeand Africa. In contrast, two-thirds of France Telecom’s proportionate subscribers originated in Western Europe. That someoperators had implemented a regional focus to their internationalisation strategies is one of the conclusions that could bedrawn from this research.

Table 2Market share of T-Mobile across Europe, 1990–2009.

Source: Compiled by the authors from a variety of sources.

Country T-Mobile invested in Year

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Hungary 1993 – – – 100 80 73 64 63 60 58 53 51 51 48 46 45 44 45 44 44

Austria 1995 – – – – – 0 2 19 35 35 34 33 30 28 25 34 34 33 32 31

Czech Rep. 1996 – – – – – – 17 33 39 45 43 41 41 40 41 40 41 40 40 40

Croatia 1999 – – – – – – – – – 62 55 51 53 51 53 56 48 47 46 47

UK 1999 – – – – – – – – – – 21 23 25 26 24 23 24 24 22 22

Macedonia 2001 – – – – – – – – – – – 100 100 86 76 69 67 62 58 66

Netherlands 2002 – – – – – – – – – – – – 12 15 15 14 16 28 28 28

Bosnia-Herzegovina 2003 – – – – – – – – – – – – – 13 13 14 16 19 20 22

Poland 2003 – – – – – – – – – – – – – 36 37 35 33 31 30 30

Montenegro 2005 – – – – – – – – – – – – – – – 47 42 33 41 37

Slovakia 2005 – – – – – – – – – – – – – – – 44 45 40 41 41

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J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236232

The regional focus of some mobile operators echoed Whalley and Curwen (2005) who examined the fragmentation ofthe mobile sector within Europe. They found that regional strategies had been implemented by TeliaSonera and Tele2,while the investments of Hutchison Whampoa, which operates across Europe using the ‘3’ brand name, were deliberatelyin a broad array of countries. In contrast, the investments of mmO2 – which subsequently became O2 prior to beingacquired by Telefonica – and Orange were scattered across Europe due to a multitude of circumstances. In addition toTeliaSonera noted above, Table 3 would suggest that several other operators have adopted such a strategy. The investmentfootprints of three operators – T-Mobile, OTE and Telekom Austria – continue to favour Central and Eastern Europe and theBalkans.

The scattering of investments across a multitude of countries, either through choice or circumstance, negates thebenefits that may be derived from being present in contiguous markets. One such benefit would be the internalisation ofroaming traffic as customers move across borders, while another would be increased brand recognition (assuming that thesame brand is used in different markets). A third benefit could be shared marketing efforts. Given the advantagesassociated with an operator being present in contiguous markets, one question to ask is whether such a strategy has beenenacted and, if it has, whether it is possible to identify the benefits that accrue from such a strategy.

Fig. 3 presents the European footprint of T-Mobile. These investments are both directly and indirectly held (but do notinclude those held via OTE). The market share of T-Mobile in these countries ranges from just over 20% in the case of theBosnia-Herzegovina and the UK to more than 60% in Macedonia, though its market share in most countries fallssomewhere between 30% and 50%. However, this sheds little light on whether the creation of a contiguous footprint hasenhanced T-Mobile’s market share. With the notable exception of the UK, at the end of December 2009 T-Mobile waseither the largest (Bosnia-Herzegovina, Croatia, Czech Republic, Hungary, Macedonia) or second-largest operator (Austria,Montenegro, Slovakia) by market share, although it was almost exactly the same size as the third-largest operator inPoland.

Since all of the markets in which T-Mobile is present are competitive and its market share has inevitably changed overtime, the market position noted above may be due to competitive pressures or the creation of a contiguous footprint over anumber of years. Table 2 presents the market share of T-Mobile in those European countries outside of its home marketwhere it was present at the end of 2010. Drawing on this table it is possible to identify several types of market: Hungary,The Netherlands and Poland are examples of countries where the market share of T-Mobile appears to have stabilised inrecent years, while Austria and the UK illustrate countries where it continues to decline, albeit slowly. While thesestabilised or slowly declining market shares arguably reflect the competitive pressures faced by T-Mobile in these markets,it is not clear what the contribution of a contiguous footprint has been. It could be argued that T-Mobile’s investments inBosnia-Herzegovina and Slovakia both benefited from its earlier investments in neighbouring countries. In Bosnia-Herzegovina, T-Mobile has steadily increased its market share so that by the end of 2010 it controlled 30% of the marketwhile in Slovakia, its declining market share has been arrested.

As noted above, Deutsche Telekom owned a 30% stake in OTE at the end of 2010 (which it has been forced to increasevia an option to 40% in June 2011). The direct and indirect investments of OTE are focused in the Balkans, and thusgeographically complement, and in two cases replicate, the footprint of T-Mobile. Where there is no overlap, OTE is thelargest operator by market share in three countries (Albania, Greece and Serbia) and the second-largest operator inBulgaria. OTE was the third-largest operator in Romania at the end of 2010. Where there is an overlap between the two

Fig. 3. European footprint of T-Mobile, 31 December 2010.

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236 233

operators, through OTE’s 20% stake in Telekom Srbija, these investments occupy a lower market position than those ofT-Mobile.

One possible explanation for the differences in market position between T-Mobile and OTE is that the former hasadopted a more consistent branding strategy than the latter. With the exception of Poland and Bosnia, all of its mobileoperations are branded as T-Mobile. In contrast, Cosmote is used in Greece and Romania, AMC in Albania and Globul inBulgaria. The mobile businesses of Telekom Srbija are also branded differently. The use of multiple brands would negateany benefits that might occur from heightened brand recognition as consumers roam. It is worth noting that therebranding of RomTelecom in 2005 to Cosmote corresponded to the start of its growth.

Another operator that uses multiple brands across its international footprint is Telekom Austria. As can be observed fromTable 3, the international investments of Telekom Austria can be divided geographically into two groups, centredrespectively on Austria and the Balkans. In the former group, different brands have been adopted in Austria and Liechtenstein

Table 3Operator footprints,a 1 July 2011.

Source: Compiled by the authors from a variety of sources

Country Vodafone Vodafone partner

agreements

T-Mobile OTE TeliaSonera Telekom

Austria

Albania Yes Yes

Andorra

Austria Yes Yes Yes

Belgium Yes

Bosnia-Herzegovina Yes Yes

Bulgaria Yes Yes Yes

Croatia Yes Yes Yes

Cyprusb Yes

Czech Republic Yes Yes

Denmark Yes Yes

Estonia Yes Yes

Faroe Islands Yes

Finland Yes Yes

France Yes

Georgia Yes

Germany Yes Yes

Gibraltar

Greece Yes Yes

Greenland

Guernsey Yes

Hungary Yes Yes

Iceland Yes

Ireland Yes

Isle of Man

Italy Yes

Jersey Yes

Latvia Yes Yes

Liechtenstein Yes

Lithuania Yes Yes

Luxembourg Yes

Macedonia Yes Yes Yes

Malta Yes

Moldova Yes

Monaco

Montenegro Yes Yes

Netherlands Yes Yes

Norway Yes Yes

Poland Yes Yes

Portugal Yes

Romania Yes Yes

Serbia Yes Yes Yes

Slovakia Yes

Slovenia Yes Yes

Spain Yes Yes

Sweden Yes Yes

Switzerland Yes

Turkey Yes Yes

UK Yes Yes

Ukraine Yes Yes

a Includes direct and indirect stakes.b The relevant country is South Cyprus. North Cyprus is considered to be part of Turkey.

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236234

(mobilkom) compared to Slovenia (si-mobil). In the Balkans, the same brand – Vip – is used in three markets (Croatia,Macedonia and Serbia) where it is either the second- or third-placed operator. A different brand is used in Bulgaria, wheremobitel, Telekom Austria’s subsidiary, was the largest operator at the end of 2010. Given the relative market positions of thevarious mobile businesses, it is difficult to argue that the use of multiple brands has been disadvantageous. Indeed, given themarket positions where the same brand has been used, quite the opposite could be argued. In both Macedonia and Serbia,where Vip is used, the Telekom Austria subsidiary is the third-placed operator in the market. That said, it may be too early toassess whether any benefits accrue from the use of the same brand due to the relatively recent launch of the operations inMacedonia and Serbia.

TeliaSonera is present throughout the Nordic and Baltic regions. In the four Nordic markets where it is present, itcomprises the largest mobile operator by subscribers in Sweden, the second-largest in Norway and Finland and the third-largest in Denmark. While it uses the same brand – Telia – in Denmark and Sweden, other brands are used in theremaining two Nordic markets. Different brands are also employed by TeliaSonera in Estonia (EMT), Latvia (LMT) andLithuania (Omnitel). As the market position of TeliaSonera in these three markets is first in every case, it does not appear tobe the case that separate brands have held back the company. While some of the remaining mobile businesses ofTeliaSonera are contiguous, they do not use the same brand.

Vodafone has not concentrated upon one regional market within the sample, but has instead invested across a broadrange of countries. In those markets where it has invested and uses the Vodafone brand name, it is the largest operator inGreece, Ireland and Malta. Of the other markets where it is present, it is the second-largest in all but one case, the UK,where it was the third-largest operator at the end of 2009 before the creation of Everything Everywhere.

According to the Vodafone website, it has established 24 partner network agreements in Europe as defined for thispaper. The extent to which they have adopted the Vodafone branding differs, as does the degree to which they co-ordinatetheir marketing efforts with Vodafone. As a consequence, some of the partners have incorporated Vodafone into theirname while others continue to use their existing brand and engage in other forms of co-branding activities. For example, inIceland the brand name used is Vodafone Iceland, while in Estonia it is Elisa and in Switzerland it is Swisscom.

The market position of the partners varies across the sample. In seven countries – Austria, Belgium, Bulgaria, Cyprus(South), Denmark, Finland and Switzerland – Vodafone’s partner was the largest operator by market share at the end of2010. Interestingly, in only one of these seven countries, Cyprus (South), does Vodafone appear as part of the operator’sbrand. Of the remaining partners, there was a more or less even split between those that were second- and third-placed intheir respective markets.

5. Conclusion

This paper has focused on incumbents within the mobile markets of a broadly defined Europe. From the literaturereview presented in Section 2 it is possible to identify a range of first-mover advantages that help the incumbent mobileoperator maintain its position as the largest operator in the market once it has been liberalised. The paper has shown, inSection 4, that in many European markets, the incumbent remains the largest operator, suggesting that there aresignificant first-mover advantages in mobile markets.

With this in mind, the first observation that can be made is that recent entrants have found it difficult to enter and thenthrive in mobile markets in Europe. One possible explanation for this could be that mobile markets are highlyconcentrated, with the two largest mobile operators often controlling between them substantially more than half of themarket. The division of the remainder of the market between the other mobile operators in the market impinges on theircompetitiveness, through, for instance, limiting their ability to enjoy scale economies.

This should not be interpreted as implying that the dominant position of the incumbent mobile operator cannot beoverturned as there are sufficient examples across Europe that illustrate that this is possible. One reason why the marketposition of incumbents has been overturned is that they did not migrate to successor technologies such as 2G that offeredoperators advantages over those using 1G. While the transition from 1G to 2G mobile technologies provided anopportunity for later entrants to overturn the leading position of incumbent operators in the market, this did not occurwith the transition from 2G to 3G. Through leveraging their subscriber base and delaying their own migration to 3G,existing 2G mobile operators were able to withstand the competitive pressures that 3G-based new entrants such asHutchison brought about. In those countries where 3G-only new entrants have launched, they are the smallest operator inthe market. In other words, the advantages derived from 3G have, to date, proved insufficient to overcome those arisingfrom an installed 2G subscriber base.

A second observation is that the use of multiple brands by operators highlights the fragmented nature of the Europeanmobile market. No operator is present in all of the European countries surveyed, although Vodafone comes the closestwhen its direct investments are combined with its 24 partner network agreements. Deutsche Telekom has focused itsattention on two regions—Central and Eastern Europe and the Balkans, adopting a single brand in most countries.However, its minority stake in OTE is insufficient to enable Deutsche Telekom to impose the T-Mobile brand in the Balkans.The other operators that have built contiguous footprints for themselves, such as Telekom Austria and TeliaSonera, do notuse a single brand in all their markets. The adoption of multiple brands by these two operators would suggest that theadvantages associated with a single brand are not as clear as first imagined, with the use of a brand familiar within thenational context being more important.

J. Whalley, P. Curwen / Telecommunications Policy 36 (2012) 222–236 235

The internationalisation that has occurred within the mobile telecommunications industry is reflected in the regionalfocus of some operators and the use of a common brand in more than a single market. Internationalisation enablesoperators to transfer learning between markets so that their competitiveness is enhanced as well as to enjoy scaleeconomies in areas such as the purchase of handsets, while consumers benefit from a more competitive market and theability to roam on preferential terms or access services outside of their home market. However, the manner in whichinternationalisation and its associated benefits influence the growth of operators in specific markets remains largelyunclear. While Ibbott (2007) has explored how Vodafone has sought to integrate its various national subsidiaries, this is arelatively unusual. As it is not clear how, in practice, internationalisation has influenced the competitiveness of operatorsand thus enabled them to prosper, further research is required in this area. One aspect of this future research could be todetermine how learning is transferred between national markets so that competitiveness is enhanced, while a second iswhether the use of common brands improves the amount of revenue generated through roaming between nationalmarkets.

This paper also suggests that further work is required in two areas. Firstly, there are benefits to be gained from engagingin comparative studies. By comparing the structure of mobile markets with that of other industries that share similarcharacteristics such as limited entry opportunities through licensing, successive generations of technologies or the needfor large capital expenditure, it would be possible to ascertain how typical its concentrated nature actually is. If the otherindustries display a market structure where companies are more equally sized, regulatory action of some sort is required.Conversely, if these other industries are similarly structured, the case for regulatory intervention is diminished.

Secondly, further work is required to create databases that enable trends within European mobile markets to bediscerned. While the cross-checking of Curwen and Whalley (2004, 2008) with Global Mobile did increase the robustnessof the database, additional work is required to ensure consistency and reliability. Only once this has been achieved canmore sophisticated techniques be employed to explore the relationship between the incumbent and its position in themarket.

At the same time, additional variables need to be included in the analysis. One such variable would be the financialperformance of the mobile operator. Although a variety of measures such as operating income and average revenue peruser (ARPU) are available, two significant obstacles will need to be overcome: ensuring consistency between years andoperators to enable meaningful comparisons to be made and ensuring that data are collected for more than just a handfulof years. The financial performance of a mobile operator reflects the strategy that it has adopted, with enhanced profitsindicating that the strategy has maintained or enhanced its competitiveness vis-�a-vis other operators in the market.However, it does not shed light on whether the strategy was to focus on business or residential users or on pre-paidinstead of post-paid users. Thus, another variable that could also be included in future research is the strategy that hasbeen adopted by the mobile operator. This could take the form of an events analysis that identifies, for example, changes instrategy and then maps them onto market share and financial performance.

A third set of variables for inclusion relates to the marketing activities undertaken by mobile operators. The analysiscould include how much the mobile operator spends on marketing, or the impact that adopting a new brand or exclusivelydistributing a handset has on market share.

Regulatory measures could also be included. One such measure would be whether mobile number portability has beenintroduced in a particular market, as its presence would encourage churn between operators through the reduction ofswitching costs. A second regulatory measure that could be included is the extent to which mobile termination rates havebeen reduced, with reductions encouraging operators to devise new strategies to retain and attract customers.

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