Prague University of Economics and Business
Bachelor’s Thesis
2021 Nurdaulet Willmott
Prague University of Economics and Business Faculty of Business Administration
Bachelors´s Field: Corporate Finance and Management
Title of the Bachelor’s Thesis:
Strategic Analysis of
the O2 Czech Republic a.s. on the market of Czech fixed internet providers
Author: Nurdaulet Willmott
Supervisor: Ing. Patrik Sieber, Ph.D.
D e c l a r a t i o n o f A u t h e n t i c i t y
I hereby declare that the Bachelor’s Thesis presented herein is my own work, or fully and specifically acknowledged wherever adapted from
other sources. This work has not been published or submitted elsewhere for the requirement of a degree programme.
Prague, December 15, 2021 Nurdaulet Willmott
Acknowledgement
I would like to thank my supervisor Patrik Sieber, Ph.D. for supporting me in
the process of writing this bachelor's thesis.
Title of the Bachelor’s Thesis:
Strategic Analysis of the O2 Czech Republic, a.s. on the market of Czech fixed internet providers
Abstract:
The aim of this bachelor thesis is to determine the strength, weaknesses, opportunities, and threats of the O2 Czech Republic a.s. company on the market of Czech fixed internet providers.
The research is conducted via the analysis of external and internal business environments and is separated into a theoretical part which describes the tools applied in the practical part. The tools used for the research include corporate statement, stakeholder, PEST, Porter’s five forces, industry life cycle, market segmentation, VRIO, benchmarking, scenario planning analyses, which are then summarised in the SWOT framework describing key strengths, weaknesses, opportunities and threats.
Key words:
O2 Czech Republic, fixed internet provider, strategic analysis
Table of Contents
1. Introduction ... 11
2. Theoretical part ... 12
2.1. Corporate strategic analysis ... 12
2.2. Corporate statement analysis ... 13
2.2.1. Mission ... 13
2.2.2. Vision... 13
2.2.3. Mantra ... 13
2.3. Stakeholder matrix analysis ... 14
2.4. Analysis of the environment ... 15
2.5. External environment analysis ... 15
2.5.1. PEST analysis ... 15
2.6. Internal environment analysis ... 17
2.6.1. Porter’s five forces ... 17
2.6.2. Industry life cycle analysis ... 18
2.6.3. Market segmentation analysis ... 20
2.6.4. VRIO framework ... 21
2.6.5. Benchmarking ... 22
2.7. Scenario planning... 23
2.8. SWOT analysis ... 24
3. Practical Part ... 25
3.1. Company information ... 25
3.1.1. Company history... 26
3.1.2. Product portfolio ... 27
3.2. Corporate statements analysis ... 28
3.2.1. Mission ... 28
3.2.2. Vision... 28
3.2.3. Mantra ... 29
3.1. Stakeholder matrix ... 30
3.2. Analysis of the external environment ... 34
3.2.1. PEST analysis ... 34
3.3. Analysis of internal environment ... 41
3.3.1. Porter’s 5 forces analysis ... 41
3.3.2. Industry life cycle. ... 48
3.3.3. Market segmentation ... 50
3.3.4. VRIO analysis... 53
3.3.5. Benchmarking ... 56
3.4. Scenario planning... 62
3.5. SWOT ... 64
4. Conclusion ... 66
5. References ... 69
Table of figures
Figure 1 Stakeholder matrix. Source: (Johnson, Scholes, & Whittington, 2008, Author) 14 Figure 2 Industry Life cycle graph, Source: (Johnson, Scholes, & Whittington, 2008) .... 19 Figure 3 VRIO Framework Source: (Barney & Hesterly, 2012, Author) ... 21 Figure 4 Scenario Planning Model Source: (Roland Berger, 2013, Author) ... 23 Figure 5 SWOT analysis framework, Source: (Johnson, Scholes, & Whittington, 2008, Author) ... 24
Figure 6 Stakeholder Matrix, Source (Author) ... 33 Figure 7 Inflation rate in the Czech Republic 2017-2020, Source (World Bank, 2020, Author) ... 36
Figure 8 Unemployment rate in the Czech Republic 2020-2021, Source: (Statista, 2021, Author) ... 37
Figure 9 Average monthly gross wage in the Czech Republic 2010-2020, Source: (Statista, 2021, Author) ... 37
Figure 10 Population percentage using the internet service in the period 2000-2020, Source:
(World Bank 2021, Author) ... 38 Figure 11 Frequency of internet use in the Czech Republic 2018-2020, Source: (Statista, 2021, Author) ... 39
Figure 12 Senior population percentage, accessing the internet in the last three months, (Source CSO, 2020, Author) ... 40
Figure 13 Share of internet access for different technological solutions, Source: (CTO, 2021, Author) ... 45
Figure 14 Monthly price for 100 Mbit/s of internet connection speed, Source: (Tarifon, 2021, Author) ... 46
Figure 15 Share of households with fixed internet access through the years 2003-2020, Source: (Statista 2021, Author) ... 48
Figure 16 Fixed Data industry Revenue change forecast, Source: (Statista 2021, Author) ... 49 Figure 17 Percentage of population living in Urban and Rural Areas in the period from 1960 to 2020, Source: (World Bank, 2020, Author) ... 50
Figure 18 Use of internet classified by gender and age groups, Source: (CTO 2021, Author) ... 51 Figure 19 Share of Total Population categorised by age, Source:( CSO 2021, Author) ... 51
Figure 20 Profitability ratio comparison of O2, T-Mobile and Vodafone in 2020, Source:
(Author)... 57 Figure 21 Activity ratios comparison of O2, T-Mobile and Vodafone in 2020, Source:
(Author)... 58 Figure 22 Leverage ratios comparison of O2, T-Mobile and Vodafone in 2020, Source:
(Author)... 58 Figure 23 Scenario planning analysis graphed plot, Source: (Author) ... 63
Table of tables
Table 1 Subscription Tier-list including Prices and Speeds for fixed connection, Source:
(O2, 2021, Author) ... 27 Table 2 Stakeholder evaluation of Interest and Power on a scale from 1 to 10, Source:
(Author)... 33 Table 3 VRIO analysis of O2's internal resources Source: (Author) ... 55 Table 4 Key financial information and ratio calculations of O2, T-Mobile, Vodafone from the fiscal year 2020, Source: (O2, 2021, T-Mobile, 2021, Vodafone, 2021, Author) ... 56
Table 5 Key financial information and ratio calculations comparison of O2, through the years 2016-2020, Source: (O2,2021, O2, 2019, O2, 2018, Author) ... 60
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1.Introduction
The topic for the chosen research is the strategic analysis of the leading telecommunication provider in the Czech market - O2 Czech Republic a.s. The company has been operating since 1994, and was also known as SPT telecom, Cesky Telecom, Eurotel Praha and Telefonica O2.
The former operating activities were connected to fixed telephone line and mobile telephone network provisioning but today the company also provides fixed and mobile internet services along with television subscriptions. (Ministry of Justice, 2021)
Due to a wide variety of revenue generating activities, the analysis is primarily concerned with the performance of the company in the sector of fixed internet service provisioning. In which the major share of the market is held by local service providers and only a quarter is covered by O2 and its multinational competitors T-Mobile and Vodafone.
The goal of the study is to define the strengths, weaknesses, opportunities, threats of the O2 Czech Republic a.s. strategic position on the Czech market of fixed internet providers. This is achieved by analysing the outer and inner environments in which the business operates with a number of tools. The description of tools applied in the practical part is given in the theoretical part of the paper.
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2.Theoretical part
2.1. Corporate strategic analysis
The purpose of a strategic analysis is to determine the company’s strategic strengths weaknesses, opportunities, and threats by evaluating the external and internal business environments. These are thoroughly examined in order to identify the elements and figures that may be critical in sustaining or gaining additional competitive advantage. (Johnson, Scholes,
& Whittington, 2008)
The strategy of any commercial company is the efficient enablement of resources to achieve the most beneficial outcomes. This may be achieved by encompassing certain strategic decisions, which are aimed at sustaining a competitive advantage over a long period of time.
An important aspect that a business must consider is the constantly changing environment, meaning that a successful business must oversee the future outcomes and adapt accordingly.
(Johnson, Scholes, & Whittington, 2008)
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2.2. Corporate statement analysis
The corporate statements of the company commonly consist of its approach to making the business and how it would like to be seen in the eyes of stakeholders. The most used statements are classified as Mission, Vision and Mantra of the company. (Johnson, Scholes, &
Whittington, 2008)
2.2.1. Mission
A broad comprehensive statement usually consisting of the businesses key purpose is the mission statement. A properly formulated mission statement must comply with the main values of its corporate culture, stakeholder expectations and key purpose considerations in the area of business operation. It is also considered to be a useful tool for strategy management. (Johnson, Scholes, & Whittington, 2008)
2.2.2. Vision
A statement providing the businesses view on its future operating position is called the company’s vision. It mainly focuses on the long-term achievements which the company wished to acquire, by setting out objectives in further strategic planning and implementation processes.
(Johnson, Scholes, & Whittington, 2008)
2.2.3. Mantra
A commonly short phrase summarising the company’s ideology is called a mantra statement. Mantra mainly represents a clear and concise idea which covers all the areas of operations and is also commonly associated with the company's slogan. (Johnson, Scholes, &
Whittington, 2008)
The output of the corporate statement analysis underlines the overall objectives and values of a business, by providing a clear idea how the business views it’s strategy and its brand image based on the strategy description provided.
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2.3. Stakeholder matrix analysis
The groups which possess a certain amount of interest in the company’s operation are called the stakeholders. They can commonly be associated with the suppliers, employees, consumers, government, and the society who can somehow affect the business or are interested in its performance. As the corporate environment is constantly changing, the levels of interest and power of these groups may also fluctuate. Thus, the firm must not only adapt its strategy accordingly but also accurately manage the relations with the key stakeholders. (Johnson, Scholes, & Whittington, 2008)
And to do so, managers must encompass particular strategies suiting the chosen groups of stakeholders based on their importance to the company. These strategies include:
A. Manage closely - applied to the key players with high interest and influence levels B. Keep informed - for those who are highly interested, but are limited in power
C. Keep satisfied - stakeholders with substantial power but low interest in the company D. Monitor - least significant stakeholders with low interest and insignificant power
Figure 1 Stakeholder matrix. Source: (Johnson, Scholes, & Whittington, 2008, Author)
The result of the analysis not only allows clarification of stakeholders’ importance but also shows if a company is addressing their relations accordingly. Meaning that if the business is too much focused on an insignificant stakeholder, it may reallocate the resources to pay more attention to an unappreciated group.
Level of interest
Level of power
Keep satisfied Manage closely
Monitor Keep informed
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2.4. Analysis of the environment
The environment in which the business operates provides the key resources for its survival.
Pleased customers generate revenues, suppliers provide the goods and services, the government allows the company’s legal existence. On the other hand, it can also be threatening in the means of market demand changes, new regulations, technological advancements, or the appearance of newer incumbents. (Johnson, Scholes, & Whittington, 2008)
Thus, the analysis of the environment is a crucial part of defining the strategic directions of a firm and must be performed with close attention to detail and assessed by taking possible market related changes into consideration. (Johnson, Scholes, & Whittington, 2008)
To not overcomplicate the analysis, it is broken into external and internal parts, in which the external part is concerned with the macroeconomic aspect which may affect the business, and the internal part focusing on the industry-specific indicators.
(Johnson, Scholes, & Whittington, 2008)
2.5. External environment analysis
2.5.1. PEST analysis
A common tool used for analysing the outer environment is the PEST analysis, covering political, environmental, social, and technological aspects. It consists of a comprehensive list of factors which affect the business in a good or a bad way.
Political factors relate to the government enacting or repealing policies which are relevant to the operating sector. Such include any regulatory frameworks affecting the industry competition, employment policies, trade agreements, foreign exchange rates, and other state or international level plans or rules. (Johnson, Scholes, & Whittington, 2008)
Economic factors are associated with the macroeconomic performance of the economy in which the business operates. The key factors for consideration when analysing the economic environment are the inflation rate which indicates the price stability, unemployment rates affecting the economic growth, average pay for evaluating consumer buying power, and corporate tax changes for monitoring the business conditions.
(Johnson, Scholes, & Whittington, 2008)
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Social factors commonly refer to the current state of the society, meaning the assessment of current demographic statistics, trends, and opportunities to consider. The data analysis can show possible changes in product demand in accordance with the current societal needs. It also is important to monitor the trends as the society’s values and habits change through time, and if the business fails to adapt to these circumstances, it will fail in gaining a competitive advantage. (Johnson, Scholes, & Whittington, 2008)
Technological aspects include the technological advancement which can allow a competitive advantage for the firm. The common trends include automation, artificial intelligence implementation, robotics, and other innovations for enhancing the operating processes. (Johnson, Scholes, & Whittington, 2008)
These factors can also be interconnected as for example technological advancements can create new maintenance jobs, enable more spare time for workers, and drive new standard requirements. The output of the analysis underlines certain conditions to which the business may need to adapt to and indicate further direction is strategic decision making
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2.6. Internal environment analysis
The internal environment analysis assesses the company’s position on the related market.
Further research applies a set of tools including Porter’s 5 forces, Industry life cycle and market segmentation analyses.
2.6.1. Porter’s five forces
Porter’s five forces evaluates the:
1. Power of buyers for which the key determinants are the price sensitivity and switching costs. Price sensitivity is based on the consumer’s perception of value behind the product, or simply how much he is willing to pay for it. The switching costs are represented by the negative experience from changing brands, which can be both psychological and economic. The stronger the buyer the harder it is for a firm to generate profits. (Johnson, Scholes, & Whittington, 2008)
2. Power of suppliers can be determined by supplier concentration and switching costs.
Supplier concentration means the overall extent on how much the business relies on the supplier. This can also be described by the uniqueness of the procured products or services. If a supplier is hard to replace, it means that his power is significant.
3. Threat of substitutes characterises how easily a product or service can be replaced with an alternate solution. The key determinants are switching costs, buyer propensity to substitute and relative price performance. A high threat signifies that the profitability of the business is endangered. (Grant, 2010)
4. Threat of new entrants specifies how likely it is for an incumbent to appear. The key determinants here are the entry barriers which include the capital requirements, market saturation, economies of scale and brand image. If the entry barriers are low, the threat of new incumbents is high. (Grant, 2010)
5. The Extent of rivalry outlines how competitive the market is by assessing the industry concentration, growth, switching and fixed costs. It also expresses the amount of pressure the competing companies apply on the firm's profitability. High rivalry decreases the profit potential of an industry. (Grant, 2010)
The output for the given research helps better understand not only the competitive position on the market, but also the other aspects which may affect the firm’s ability to generate profits.
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2.6.2. Industry life cycle analysis
The concept for examining through which stage the industry is going through at a particular point in time is called the industry life cycle analysis. The life cycle is broken into 5 stages each describing how and for what reasons the industry is performing in such a way. They are listed as follows:
1. Development stage - small number of businesses start to invest in the development of new products, about which only a small group of consumers is informed. The process is conducted on a small scale and with little experience, therefore causing high costs and low quality of products. The groups interested in such a purchase are commonly classified as innovation - oriented and risk tolerant. (Grant, 2010)
2. Growth stage - signifies the technological advancements, which enhance the operating process, to become widely available, therefore allowing the entry of new incumbents.
(Grant, 2010) Buyers in this stage may not distinguish differences in product offering thereby signifying their low power. This is dangerous for existing businesses, as they have not yet established a loyal customer base and can be overrun by new competition.
(Johnson, Scholes, & Whittington, 2008)
3. Shake out - the following period during which the growth decreases and the weaker incumbents are forced out from the business, due to huge rivalry. (Johnson, Scholes, &
Whittington, 2008)
4. Maturity stage - accompanied with already established economies of scale, distribution control and high experience, increase in bargaining power of buyers. During this period the main aim for the business is capturing the market share for building up a loyal customer base. (Johnson, Scholes, & Whittington, 2008)
5. Decline stage - typically followed with high exit costs and most intense rivalry.
(Johnson, Scholes, & Whittington, 2008) It can also be caused by the introduction of better and more technologically advanced products. (Grant, 2010)
The life cycle analysis must be done regularly to monitor possible threats and opportunities caused by changes in the business environments. And it is also important to understand that the length of each stage may vary in different industries.
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Figure 2 Industry Life cycle graph, Source: (Johnson, Scholes, & Whittington, 2008)
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2.6.3. Market segmentation analysis
Market segmentation refers to the distinctions between the needs of clients. A market segment is a group of consumers who share common interests but differ from those of other market segments. This understanding of what consumers and other stakeholders value, as well as how a business and its competitors position themselves to satisfy these requirements, is essential for understanding strategic capability. (Johnson, Scholes, & Whittington, 2008) It is also recommended to focus on the analysis of only the most important and suitable factors to avoid information oversaturation. The other crucial factor to consider is the changing behaviour of consumers, as those differentiations may allow the targeting of groups which were ignored before. The data analysed is commonly imported from the statistical office databases, which should include the most relevant information.
The key segmentation criteria are:
1. Geographic - division of consumer groups based on their geographical location and characteristics of it. The geography can also relate to cultural differences among different countries.
2. Demographic - criteria commonly include age, gender, marital status, income, race, and ethnicity.
3. Psychographic - factors relate to lifestyle preferences, interests, values, and beliefs.
4. Behavioural - determines how a consumer acts when buys, uses, and disposes the product. (Solomon, Bamossy, Askegaard, & Hogg, 2016)
The output of the analysis indicates the key groups the business should aim to communicate with. Also, by focusing on the most relevant groups, a firm can exclude unnecessary expenses and increase target consumer awareness of the brand, which in term can lead to increased profits. (Grant, 2010)
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2.6.4. VRIO framework
The VRIO framework is a technique for analysing if a firm's resources are being managed in a way to gain an advantage in the competitive environment. The abbreviation stands for the Value, Rarity, Inimitability and Organisation, and thereby describes whether each attribute of a resource can be characterised as such. Further breakdown of attribute definition is described as follows:
Value - the resource is considered to be valuable when it allows the enablement of an outer opportunity or can negate an external threat. (Barney & Hesterly, 2012)
Rarity - a resource which is not widely accessed by other companies can most certainly be perceived as a source of competitive advantage. (Barney & Hesterly, 2012)
Inimitability - describes whether a company is able to copy the desired asset at a low cost or not. Therefore, a competitive advantage is gained only if a resource or capability is expensive to replicate. (Barney & Hesterly, 2012)
Organisation - refers to how well an asset is organised. Only if the company has aligned the operating process to make the most of the capability’s potential, it can be marked as organised. (Barney & Hesterly, 2012)
The key idea of the framework describes how effectively a resource is handled, meaning that the extent to which a resource or capability provides a competitive advantage is measured by defining whether it fits the VRIO attributes or not. The output of the analysis is usually consolidated within a table, which highlights the distinction of how important to the business those competencies are.
Figure 3 VRIO Framework Source: (Barney & Hesterly, 2012, Author)
Extent of competitive advantage Valuable Rare Inimitable Organised
Sustained competitive advantage ✔ ✔ ✔ ✔
Temporary competitive advantage ✔ ✔ ✔
Competitive parity ✔ ✔
Competitive disadvantage ✔
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2.6.5. Benchmarking
The benchmarking consists of the industry’s best companies’ performance comparison with the one chosen for the analysis, and a historical comparison of how a business was performing through the years. Thereby financial measurements are made by calculating the performance indicators such as the profitability, activity, and leverage ratios. The data for these calculations is commonly retrieved from corporate annual reports consisting of financial statements also known as the balance sheet, income statement and cash flow statement. But even though the performance indicators give a relatively clear idea when compared, it is also important to assess the raw data for better understanding of the scale of the businesses.
(Johnson, Scholes, & Whittington, 2008)
The financial ratio types and way of interpreting them can be addressed as follows:
1. Profitability ratios – show how effective a company is in generating profits (Brealey, Myers, & Allen, 2011)
a. Return on Equity = Net income / shareholders’ equity (hereinafter Equity) b. Return on Assets = Earnings before interest and tax (EBIT) / total assets c. Return on Sales = Net income / sales
2. Activity ratios – indicates the company’s asset management effectiveness (Brealey, Myers, & Allen, 2011)
a. Turnover of assets = Sales / Total Assets b. Turnover of Fixed assets = Sales / Fixed Assets c. Turnover of Current assets = Sales / Current assets
3. Leverage ratios – indicates how much accounting leverage a company has taken on (Brealey, Myers, & Allen, 2011)
a. Debt to Equity = Debt / Equity b. Debt to Asset = Debt / Assets
c. Debt to Capital = Debt / (Debt + Equity) l d. Equity to Capital = Equity / (Debt + Equity) e. Assets to Equity = Total Assets / Equity
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2.7. Scenario planning
To mitigate the uncertainty company managers must perform possible scenario outcome assessment periodically. As the future is hardly predictable, multiple outcomes must be estimated and analysed. However, it is important to note that the future estimate is only based on the outcomes with relatively high probability connected to the overall scope of industry’s direction and consumption patterns. (Roland Berger, 2013) For the purpose of conducting such analysis the first thing a manager must evaluate is the key drivers or core uncertainties of the corporate environment’s future which also must be interrelated. Following the identification of the key drivers, the process of scenario development begins. This process is formed by grouping the connected uncertainties into internally plausible scenarios. (Johnson, Scholes, &
Whittington, 2008)
A graphed model for scenario planning analysis is illustrated in the image below.
Figure 4 Scenario Planning Model Source: (Roland Berger, 2013, Author) Key driver 1
Scenario 1 Scenario 2
Key driver 2
Scenario 3 Scenario 4
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2.8. SWOT analysis
The key outcomes from the outer and inner environments along with inner capabilities of a company are then consolidated into the SWOT framework. The purpose of the analysis is the comparative assessment of business’s internal and external factors with the competition, for further establishment of recommendation about future directions in the strategic development process. (Johnson, Scholes, & Whittington, 2008)
The framework is broken down into the evaluation of company’s:
Strength - internal positive attributes which can impose beneficial effects on a company's competitive position.
Weaknesses - internal negative side of the company, defining the areas which could be enhanced.
Opportunities - external factors which could enable room for improvements. If a company decides to take the advantage of an opportunity it can become a strength.
Threats - external risks which can become weaknesses if not properly addressed.
Figure 5 SWOT analysis framework, Source: (Johnson, Scholes, & Whittington, 2008, Author)
Opportunities Threats
External Internal
Strengths Weaknesses
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3.Practical Part
3.1. Company information
O2 Czech Republic a.s. (hereinafter referred to as O2 or the company), - is the largest provider of converged telecommunication services on the Czech market. As of December 2020, the company enabled connections to nearly 8 million fixed and mobile access points with 3922 employees on board. (O2, 2021)
The legal form of the business is joint-stock company, its registered seat is Za brumlovkou 266/2, Praha 4-Michle 140 22, Czech Republic. The VAT registration number is CZ60193336, and the Czech company identification number is 60193336. The legal date of registry of the firm is January 1st, 1994. The record is located in Section B, File 2322 of the Municipal court Commercial register in Prague (Ministry of Justice, 2021). Company website is https://www.o2.cz and the telephone numbers: +420 271 462 076, +420 271 462 169 (O2, 2021).
At the end of December 2020, 83% of company shares were held by the PPF group, a multinational investment group which also owns the CETIN infrastructure providing partner to O2. The other 17% were held by investment funds and individuals. Shares can be traded on the Prague Stock Exchange. (O2, 2021)
O2 strives to be the innovative and constantly improving telecommunication service provider, by monitoring the latest trends in technological advancements and enabling such opportunities for both retail and corporate customers in the Czech Republic. The brand actively positions itself as customer oriented and sustainable business, which also supports the society by investing funds into its charity program for supporting children living in poverty.
(PPF group, 2021)
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3.1.1. Company history
The company was first established in the year 1994, it was named as SPT telecom - a government-owned telecommunication company, covering telephony and mail services.
(Ministry of Justice, 2021) After six years it was renamed to Cesky telecom, it was no longer operated by the government and only provided fixed telephone lines. Then in 2006 it merged with Eurotel Praha, and was acquired by Telefonica O2 Czech Republic, allowing the additional provision of mobile network services. The newly consolidated business from that period of time was renamed to “O2” (Lupa, 2006). Due to a number of further acquisitions in the next two years O2 has become the largest wireless internet provider on the Czech market (Internet pro vsechny, 2011). In the period from 2011 to 2013, the business was again renamed to “Telefonica Czech Republic, a.s.” (Ministry of Justice, 2021), and merged with “Telefonica O2 business solutions” (Penize CZ, 2015). This period was considered to be revolutionary as the business was the first one to implement the free unlimited tariffs and allowed virtual operators to access O2’s infrastructure (O2, 2021). Further on at the end of 2013 Telefonica was acquired by the PPF group buying 66% of company shares, (Idnes CZ, 2013). Later in 2014-2015 the business was finally renamed to O2 Czech Republic, a.s. (Ministry of Justice, 2021), and the infrastructure managing part of the business was separated and called CETIN (Czech Telecommunication Infrastructure). From that point O2’s business activities were no longer concerned with infrastructure management, but only with retail network operations (Mobilenet CZ, 2015). In the following periods from 2014 to 2020, the partnering companies have secured the 99% coverage of the population with 4th generation standard connections and are continuously investing in the distribution of the newer 5G communication standard technologies (O2, 2021). The effective network management of the company can be supported by the results of the global network quality assessment held in 2019, in which O2 has scored the 3rd place around the globe. (O2, 2020)
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3.1.2. Product portfolio
O2 has a number of packages for each service offered and they can be bought separately or in a bundle for a discounted price. However, because the topic of the research focuses on the provision of fixed internet services, this chapter only includes the description of services related to the studied area. It is also important to mention that the offered internet package also includes a tv subscription for which the number of available channels varies according to the subscription level.
Monthly internet payments have five subscription tiers: bronze, silver, gold, platinum, and diamond. The levels are different in terms of price, download and upload speeds (O2, 2021).
Table 1 Subscription Tier-list including Prices and Speeds for fixed connection, Source: (O2, 2021, Author)
If a customer has switched from another provider or is a new client of O2, he also has to pay an additional connection establishment fee of 99 CZK and an installation fee of 499 CZK.
So, a completely new customer with a personal Wi-Fi router device has to pay nearly 900 CZK in total to enable the bronze internet package. (O2, 2021)
The customer may also choose the type of internet connection and hardware he wishes to purchase, these include:
● Fixed connection with xDSL or optic cable technology
● Wireless connection with an indoor modem or an outdoor antenna.
If a client does not already have a personal Wi-Fi router, he has the option of purchasing one with a single payment or 60 fixed fees billed monthly. (O2, 2021)
The company also offers 5G ready packages, for both indoor and outdoor spaces, however the availability of the signal must be examined by a technician. The price for the advanced connection does not differ from the tier list which was mentioned before. (O2, 2021)
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3.2. Corporate statements analysis
3.2.1. Mission
“We want to help shape the future of our customers, employees and the outside world, and we want to be seen as a sustainable business. (O2, 2021)”
O2’s mission statement proposes that the company strives to improve the quality of life for their consumers, not only by providing innovative quality products but also by encompassing the responsible approach for the future of generations. This statement directly aligns with O2’s
“our business principles” presentation. (O2, 2021)
3.2.2. Vision
“Managing reputational risks, taking advantage of market opportunities and building stable relationships with our stakeholders" (O2, 2021)
Due to the market being highly saturated with local and other multinational providers, the perception of an exceptional value behind the product can be hard to distinguish. Thus, the consumer can perceive it as overpriced due to the scale of the business. To resolve this, O2 has multiple initiatives which can support the brand image, including its charity program - O2 foundation (O2 Foundation, 2021), eco-friendliness and customer-oriented business approach (O2, 2021).
The enablement of opportunities is key for the firm to stay relevant especially in the ICT sector, where technological advancements are key to securing the competitive advantage. The latest advancement of fifth generation network standards can lead consumers to switch from an outdated provider to have faster and more stable internet connection which would allow a higher customer base and consequently higher revenues.
Of course, overextending on opportunities can cause unneeded expenses and impose bankruptcy risks, thus the business has to thoroughly assess the environment before making such decisions.
The vision statement overall represents O2’s perception of how the business would stay competitive and grow on a stable level by accurate assessment of risks and possibilities, and monitoring relationship status among those who have interest in the company.
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3.2.3. Mantra
Company’s mantra which is also most often mentioned in promotional campaigns is - “O2 smart network” (O2, 2021)
The word “smart” in the current era of IT development, constitutes not only the ease of use and access to the internet but also the enablement of various activities. Combined into a smart network - O2 underlines the comprehensive offer of not only providing home internet connection, but also mobile services and smart-television subscriptions. This gives a clear understanding to the consumer that the company is using an innovative approach to allow comprehensive services to be convenient and easy to use.
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3.1. Stakeholder matrix
In order to prevent the business from losing its grasp on either stakeholder, it is important to understand how a firm should maintain its relations with them. However due to the difference in power over the company, some groups may need either closer or not so attentive look at them. So, to best analyse the groups interested in the business’s activities, a company should understand how to maintain these relations with its stakeholders.
O2 should maintain good relationships among its stakeholders or the groups who are interested in the company’s operation. These stakeholders have a difference in stakeholder power and thus should be addressed differently. One useful tool for this analysis is the Stakeholder matrix. So further in this chapter it is going to be discussed, who are the stakeholder groups, how much power do they possess over the company, and which strategy should the business choose to maintain the relationship with a stakeholder. After the analysis is concluded, the key information is consolidated in a stakeholder matrix, highlighting the major and minor players.
The Government is a major stakeholder in this case represented by the Czech Telecommunication Office (further mentioned as CTO), Office for the protection of competition, the Chamber of Auditors, and the European Commission. CTO strictly controls the compliance with the consumer data protection and cybersecurity policies. It has the power to enforce regulations such as setting the price limit for wholesale operations. (CTO, 2021).
The Office for the protection of competition (further mentioned as OPC) along with European Commission require businesses to comply with competition rules to benefit the consumer.
(OPC, 2021) Because O2 is a large joint-stock accounting entity, it must report the annual figures and is subject to audit, according to the Chamber of Auditors (hereinafter CA) of the Czech Republic (CA, 2021).The strategy here is to manage the Government closely, as it has power to impose sanctions and fines on the business.
Key Suppliers are represented by the providers of telecommunication infrastructure - CETIN; IT services - O2 IT Services, Oracle Technologies; Tech equipment suppliers - Samsung Electronics, Apple Distribution International Ltd; Software license providers:
Microsoft, SAP, HP, IBM. Service distribution services from SWS a.s. (O2, 2021) They have a significant impact on the business, due to the majority of them being costly to substitute or to switch from. Both O2 and supplier parties are interested in long term operations. The CETIN - former part of O2, covers 99.6% of population with both fixed and mobile infrastructure
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services. (CETIN, 2021) IT services, Software license providers and Tech equipment suppliers - are the world’s industry leaders. SWS has a long-lasting relationship with O2, which would be a valuable asset to lose. It is safe to say that they are key players, as due to the scale of the Czech most successful network operator, the switching costs would impose great danger and risks.
Shareholders - since the company is publicly traded, the shareholders possess the power to either sell, buy, or keep the shares of the company. They provide equity, so it could finance its operations not only with its internal capital. O2 pays out dividends from the profit of the past year and retained earnings from the previous years. (O2, 2021) This makes the relationship mutually beneficial, however it is important to distinguish the major and minor shareholders.
PPF group holds 83.58% of total shares, which makes it a major most important shareholder which chooses the direction for the company’s strategy. Thus, it is a key player. And the other 16.42% is held by other investment funds and individual shareholders, which means that they should only be kept informed as they seek more interest from the company than vice versa.
(O2, 2021)
Employees - O2 values its employees as an important asset. Due to the technical expertise, communicative abilities and other competencies needed to do the job, the employees should be kept satisfied. (O2, 2020) To do so the employer must provide a competitive remuneration and appropriate working environment. And to measure the satisfaction of an employee, O2 conducts an annual survey, results of which are posted in the annual report. According to the 2020 annual report, 92% of the employees see O2 as a good employer. (O2, 2021) On the other hand, being a good employer and the most successful provider of telecommunication services, makes the firm attractive to new candidates which lowers the employee's negotiating power.
So, the appropriate strategy here would be to keep them informed.
Managers - like employees - require beneficial remuneration and satisfactory working conditions. However, they are more attracted to the firm being successful, as their annual bonus plans rely on the performance measurement factors, which also underlines how important a manager is to a company (O2, 2021). Also, to avoid misconduct the manager should value its employer, thus the company must pay close attention to fulfil their requirements. And by understanding this it is fair to say that managers are the key players, because the company relies on their decisions.
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Customers - one of O2’s top priority is the satisfaction of their customers, who choose to use the company’s products and services and generate income for the firm (O2, 2021). The presence of huge worldwide-known competitors like Vodafone or T-Mobile means that switching costs are low, and thereby the customer satisfaction is key to sustaining good relationships for this group. Not only being the stakeholder that brings income - is of high value to the firm, but also on an individual household level, customers do possess relatively high bargaining power due to high competition in the market. This makes the “keep satisfied”
strategy fitting for the group.
Society - represented by the Czech Republic population, one of the most important factors to consider in the modern world would be the sustainability of the business, as the society aims for long-term goals and prosperity. The value of the company for the society can be described in the current need for telecommunication services and workplaces, as the whole world is transferring to digitization, and the economy relies on growth opportunities it makes O2 a valuable asset in the minds of people. Even though, the power of the society may be represented by social groups which could boycott, spread hatred or disinformation about the company, the probability of these actions happening on a large scale is unlikely. This means that the company should suit the society's values and monitor the relationship.
Lenders - according to the annual report figures, the company is hugely financed by debt (O2, 2021) and therefore, it is important to keep good relationships with debt providers. To borrow money the firm must ensure trust in the company by keeping them informed and being credible over a long-term perspective. Even though, it is of lender’s interest to provide capital to the firm, as it would generate future cash flow from interest payments, a suiting strategy here would be to keep lenders closely managed, as they represent a large part of company’s financing structure.
The summary of the stakeholder analysis is consolidated in the table and stakeholder matrix attached below. The table consists of how interested and powerful the stakeholders are on a scale from 1 to 10.
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Table 2 Stakeholder evaluation of Interest and Power on a scale from 1 to 10, Source: (Author) And the Stakeholder Matrix indicates which approach to handling the relationship should be applied.
Figure 6 Stakeholder Matrix, Source (Author)
Stakeholder Interest Power
Government 6 7
Key Suppliers 7 6
Major shareholders 9 10
Minor shareholders 7 4
Employees 6 3
Managers 7 8
Customers 3 7
Society 4 4
Lenders 8 9
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3.2. Analysis of the external environment
To analyse the external environment of O2, the further chapter will focus on determining key factors which may affect the company’s future operations. The framework focuses on Political, Economic, Social and Technological factors. The Political part focuses on EU government regulations concerning fair trade policies. The economic environment analysis is primarily concerned with the demand for telecommunication services and consumer buying behaviour. The social criteria cover the company’s approach to Czech society, and how it views O2 as a company. And the future of 5G networks and tech innovations are covered in the Technological part of the analysis.
3.2.1. PEST analysis
The analysis focuses on the position of the company before the year 2021.
Political
The Czech mobile communications industry is extremely consolidated, with three mobile network carriers – O2 Czech Republic, T-Mobile CZ, and Vodafone – controlling nearly all of the market. O2 CZ/CETIN and T-Mobile CZ serve almost three-quarters of users collectively.
Vodafone is a smaller company and, unlike the network sharing companies, does not have a significant position in the fixed telecommunications market (EC, 2019).
According to the European commission O2 and T-Mobile have signed a somewhat questionable Network Sharing Agreement (NSA), which might violate the antitrust competitive regulations. The agreement concerns the use of the same active and passive telecommunication infrastructure by the two competing companies (EC, 2019).
Around three-quarters of users in Czechia rely on T-Mobile CZ and CETIN's shared network infrastructure. The two operators collaborate on the basis of a geographical distribution. Czechia is broadly divided into two regions, and each operator is responsible for installing, running, and maintaining the shared network in one of the two regions, as well as procuring mobile network infrastructure and associated supplies. As a result, one of the operators delivers network services not only to its own customers within its service area, but also to those of the other operator (EC, 2021).
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In 2016 the European commission started the investigation of the sharing agreements, and in 2019 has sent the Objection Statement to O2 CZ, CETIN, and T-Mobile CZ regarding the competitive rule violations. Later on, after careful investigation of all the arguments and evidence provided, the Commission has issued a preliminary assessment. According to it, the Network Sharing Agreements prevent those mobile operators from investing into telecommunication infrastructure unilaterally, thereby impairing their ability and incentives to compete in the TSP market in Czech Republic. This behaviour violates the Article 101(1) of the Treaty on the Functioning of the EU, regarding the anti-competitive contracts (EC, 2021).
The objected companies have offered their commitments to avoid possible sanctions, as they are allowed to do so according to Article 9(1) of Regulation EC (No) 1/2003 (EC, 2021). After Commission’s evaluation of the objected companies, the latter result of Commission’s evaluation would state whether the binding commitments are eligible for the cancellation of sanctions.
T-Mobile, O2, CETIN and their parent companies are to enable innovative Radio Access Network infrastructure in chosen radio frequency layers for modernisation. They are to assure cost-based pricing for future investment and service projects to suit the financial conditions of each provider’s network deployment liabilities. The contract provisioning is to be rearranged to meet the requirement of only absolute necessary information exchange among the competing companies (EC, 2021).
Economic
To measure the economic factors in the macroenvironment analysis, it is best to refer to key economic indicators. Key indicators in further analysis include: the corporate income tax, inflation, average pay, and unemployment
The corporate income tax has remained at 19% for more than 10 years now and according to Statista's forecast, it should remain at the same level until 2025 at least. The corporate income tax increase could affect the prices of services not only for O2 but for all the businesses in Czechia (Statista, 2021). The stability of the income tax signifies how the government even during the pandemic times manages to not apply additional financial pressure on the businesses.
The inflation rate in Czechia is considered to be stable, annual average varying from 2.4%
in 2018 to 3.1% in 2020 (World Bank, 2020). A stable inflation rate is considered to be
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beneficial for the economy, as it allows individuals to plan their spendings efficiently, and the same applies for the businesses, planning the allocation of costs in the future. The key takeaway would be that the Czech inflation rate allows stability and growth for the business. However, the recent results from October 2021 signify the unexpected rise of inflation to 4.9%, the highest rate since 2008, the increase was mainly driven by increase in price for utilities, housing, transport, food, and alcohol (Trading Economics, 2021).
Figure 7 Inflation rate in the Czech Republic 2017-2020, Source (World Bank, 2020, Author) The Unemployment rate in Czechia varies insignificantly around the 3% mark (Statista, 2021). According to the data provided by Statista, in June 2021 the unemployment rate in Czech Republic was the lowest compared to the European Union member states, with the maximum of 15.1% in Greece and Spain, and average for the whole EU of 7.1%
(Statista, 2021). The low unemployment rate means healthy economic conditions and future prosperity, a beneficial factor for the businesses inside the Czech Republic.
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Figure 8 Unemployment rate in the Czech Republic 2020-2021, Source: (Statista, 2021, Author) Another important factor signifying the economic growth is the average monthly wage in Czech Republic. For the last 10 years it has been steadily increasing allowing consumers to have higher disposable incomes and managing their living costs. Along with the annual average inflation rate being stable around 3%, the annual average increase in gross wages in the period from 2016 has been near to 6% (Statista, 2021). Meaning that year on year net wage increase was about 3%, allowing consumers to buy more. A healthy indicator for Czech businesses, signifying that an average consumer’s disposable income, can manage a slight price increase.
Figure 9 Average monthly gross wage in the Czech Republic 2010-2020, Source: (Statista, 2021, Author)
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Social
A major social factor for the company here would be the current demand for telecommunication services associated with the COVID-19 lockdown situation. The rise of home offices had caused the internet providers to extend their network capacity. People working or studying from home demanded stable internet connection to attend corporate meetings or study sessions (O2, 2021). The demand for stable connections was growing not only in the major cities but in the countryside too. Groups, tired from living in enclosed spaces and not able to go out, moved out from the city. This has caused more pressure on the non- urban area networks. The ICT sector was on a rise and the digitization of businesses had accelerated (CTO, 2021). Now the company has to better sustain the network stability and adapt accordingly when the COVID situation improves. As when the home office would no longer be needed, an efficient resource allocation could decrease the costs of running the extended networks.
To underline the demand for internet connections a graph showing the percentage of population with access to the internet has been modelled. As can be seen in the figure, in recent years (2018-2020), above 80% or the majority, has access to the internet (World Bank, 2021).
Figure 10 Population percentage using the internet service in the period 2000-2020, Source:
(World Bank 2021, Author)
The second factor for measuring the demand for it would be the frequency of internet usage, according to the data from Statista, in 2020 79% of the population were accessing the internet daily, and 97% at least once a week, the numbers have slightly increased in relation to the
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previous two years. These numbers can clearly represent that the Czech population is an active group when it comes to using the internet (Statista, 2021).
Figure 11 Frequency of internet use in the Czech Republic 2018-2020, Source: (Statista, 2021, Author)
Another factor in understanding the demand for the internet, is the age split among users of it. As the older population is considered to be more conservative, the internet resource may be treated as unnecessary and too complex (O2, 2021). Thus, it is useful to understand whether the older demographic group has potential to become the new customers, which is always good for the business. According to Czech Statistical Office (CSO), the Czech senior population (65 years and older) using the internet, in the last 11 years, has more than tripled. Over 25% of the senior group now use it on a daily basis, and 40% have accessed it in the last 3 months (CSO, 2021). This is a huge opportunity for O2, and possible future educational promotions can increase the customer base.
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Figure 12 Senior population percentage, accessing the internet in the last three months, (Source CSO, 2020, Author)
Technological
The most significant technological advancement of recent years is the new generation of mobile communication technology - 5G. From September 8th O2 has announced that the company along with CETIN, the major telecommunication infrastructure provider has secured the access for the development and operations of the 5th generation network for the further 30 years (O2, 2021).
The implementation of the newer network would significantly affect the future of digitization among businesses and households. Newest network would allow a faster enablement of industry 4.0 or the automation of major operations in the business sector. The increasing supply and demand for “smart” goods would also benefit from faster connections (EC, 2021). And securing this capability would in term become a major competitive advantage.
Even though the company has already enabled 5G connection in some areas, there is no additional cost for using it (CMS, 2021). This might become an issue as the development of the infrastructure would impair huge costs on the business (EU4Digital, 2021).
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3.3. Analysis of internal environment
3.3.1. Porter’s 5 forces analysis
Bargaining power of buyers
So, to understand the consumer bargaining power, it is first important to analyse the key attributes of a product that bring value to the consumer - price sensitivity, and second the assessment of switching costs in the relevant market.
According to the Body of European Regulators for Electronic Communications (hereinafter BEREC) the majority of internet users have agreed with the following statement: "Every individual should be able to access all internet contents and applications”, implying that net neutrality or simply the online freedom is one the key factors for choosing an Internet Service Provider. The other two key factors playing a huge role in price-value perception are the download speed and data caps also known as the monthly limits for the volume of data used (BEREC, 2015). Consumers can easily measure the differences in these attributes with the aid of a public accessible price calculator - Tarifon, provided by the Czech Telecommunication office (CTO, 2021). Even though the prices are easily comparable and there are a huge number of smaller companies, the consumer would also need to check whether the fixed connection is established in his area of living, by communication with the desired internet provider (Tarifon, 2021).
The switching costs for a consumer mainly depend on the contract agreement with the service provider. O2’s early termination policy states that if a consumer decides to end his contract before the minimum subscription term, he is required to pay for the rest contract related duration excluding VAT at prevailing rate. Meaning that if a consumer has a 12-month subscription contract, and decides to quit on the 6th month, he is required to pay for the other 6 months minus the 4%. However, if the customer has fulfilled the minimum subscription duration criteria, he is only required to submit a cancelation request with a 30 days’ notice (O2, 2021). The other two major internet providers T-Mobile (T-Mobile, 2021) and Vodafone (Vodafone, 2021), have similar termination policies.
Summarising the fact that the comparison of prices is easily attainable, the connection availability being uncertain, the zero switching costs when fulfilling the contract minimum duration, and a huge number of local competing companies, it makes the consumer’s
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bargaining power of above medium value, especially in the case of O2 which possess only about 18% of the market share (CTO, 2021).
The consumer bargaining power is estimated to be of medium value, due to switching costs being high in the instance of early termination and a wide choice essentially depending on the network availability in the area.
Bargaining power of suppliers
The O2’s stakeholder policy states that the company works with sustainable suppliers who care for the environment, by ensuring fair and transparent conditions for contract agreements and future partnerships (O2, 2021).
The company has partnered with major industry players, being infrastructure, IT equipment and service providers. Suppliers should be highly interested in partnering with the top telecommunication provider in the country, however they are not obliged to work with it exclusively. For the assessment of bargaining power, a further analysis would focus on the switching costs and key factors of supplier companies affecting the customer choice.
The major infrastructure provider CETIN is not only a partner for O2 but also for T-Mobile and Vodafone (CETIN, 2021). However due to both companies being a part of the PPF group, CETIN is much more interested in cooperation with O2 than with its competitors. The switching costs are to be found in contract agreements, which are usually signed for a long- term duration.
The IT equipment and service providers are also represented by large industry leaders, which also cooperate with other telecommunication companies and agree to partner for the long term. Switching between one another would result in decreased consumer base, an unnecessary loss given the contractual circumstance. Nonetheless being the multinational distributors of tech equipment (Samsung and Apple), it is mostly the decision of supplier companies to cooperate, than of the network provider.
For the software providers being the multinational corporations (Microsoft, IBM, SAP) - it is of O2’s interest to partner with them, as they are the globally renowned industry leaders, and have plenty of other customers to select from.
Even though the companies are multinational, they would still be interested in partnering with O2 as it is the largest service provider in the industry. And the fact that O2 wants the
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partnering companies to be sustainable only benefits the brand image of above-mentioned companies. Taking all of the previously mentioned points, it is safe to say that the bargaining power of suppliers is of higher than medium value, mainly due to their mutual beneficence and inimitability.
Threat of substitutes
Internet and telephony open up countless possibilities to a consumer, so a number of key purposes for the use of internet and telephony have been chosen to analyse how they may be substituted. These include Communication, Work and Study, Entertainment, Purchase of goods and services.
Originally arising from the beginning of human history, communication has been the key for society's survival. Telecommunication has made this activity much easier, as today people may connect from different parts of the world in seconds or even less, when before they had to travel for days or even years.
According to Trine Syvertsen, the overuse of the internet may lead to negative lifestyle consequences, especially in the most digitised countries. It can cause anxiety, depression or other psychological problems. So, one of the recent cures for it was the so-called Digital Detox.
People who suffered from the overuse simply stopped using social media for an indefinite amount of time. This led to them rethinking their affection for social media appropriation of their image, and consequently lower use of it. However, the majority of people who chose to participate in the research, have stated that it would be impossible to avoid using the technology for communication (Syvertsen, 2020).
The pandemic situation and self-preservative measures enacted by the government, has only increased the use of the internet for study purposes. The internet long ago has replaced the routine of going to the library and the long process of searching for needed materials.
Everything is now on hand and most of the information can be accessed in seconds. Society in general is expecting to get back to school for onsite education after the pandemic ends, however a major trend of online schools would still be in place, as it allows a more convenient way for living with the features of flexible hours and no travel costs (Altmann, Ebersberger, Mössenlechner, & Wieser, 2018).
As for studying from home, the same has been applied to workers whose jobs could be fulfilled from a distance. Companies had to switch to home office, thereby increasing the
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demand for stable connections for corporate meetups. As the ICT sector is currently on a rise, it is expected that workplaces with home office features would increase in term, compensating for the employees coming back to the office after the pandemic ends (Irawanto, Novianti, & Kenny, 2021).
Digital environment includes all sources of entertainment, the most popular activities are related social media browsing, video and audio playthrough, reading and gaming. Again, due to the pandemic lockdown, the demand for online entertainment has skyrocketed, however some activities still remain to be irreplaceable by it. The extent to which people use the internet may decrease in the future, however it would not result in them completely giving up on it (Syvertsen, 2020).
Taking all of the above-mentioned points into consideration, it is safe to say that people may not exclude the internet from their lives completely, however they may change the amount of time they spend online in the future. This makes the threat of substitutes be of low level.
The extent of rivalry
When measuring the extent of rivalry, it is key to understanding who the competitors are and how much market share they possess. For this information it is best to refer to Czech Telecommunication office.
According to CTO the demand for internet connection in 2020 has grown by 3% in relation to 2019, reaching a total of 3.824 million subscribers. The largest portion of consumers are using xDSL, FTTH/B and CATV - optic fibre networks, and FWA (fixed wireless access or Fixed LTE in the graph below) - mostly used in the countryside, and unlicensed connection types (marked as Wi-Fi in graph below). The Czech market’s most used type is unlicensed connection (28%), represented by small companies providing access to Czech households with local fibre and wireless internet access of unlicensed bands. The second most used solution is xDSL (25% including O2) mainly provided by Czech biggest service providers - O2, Vodafone and T-Mobile, O2’s has the highest share among them with roughly 18% of users connected (CTO, 2021).
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Figure 13 Share of internet access for different technological solutions, Source: (CTO, 2021, Author)
According to the data provided by CTO a tier list of major industry players has been established:
1. O2 - xDSL and Fixed LTE
2. Vodafone and UPC - CATV, xDSL, fixed LTE, xDSL 3. T-Mobile - xDSL, fixed LTE
4. Various local providers - FTTH/B, CATV, Wi-Fi (non-licensed frequencies)
Even though it is more or less clear who the major network providers are, it is also important to understand who the local companies are and why they have so much market share. The main reason for this is product differences, as the minor telecommunication companies have provided easy-establish able connections where the CETIN infrastructure was not yet available.
As before the complete liberalisation of the former O2 - Czech Telecom, could not afford the provision of xDSL technologies across the whole country, thus it had to mainly focus on the areas with higher population density. This led to the emergence of smaller telecoms like Rtyne.net covering the eastern part of Czechia or Ujezd.net for eastern part of Prague (Maly, 2019). The current most used local providers are STARNET, PODA, RIO Media, Nej.cz, SMART Comp, COMA, Tlapnet, Planet A and others (CTO, 2021).
The other crucial point for the analysis of rivalry is the monthly price for internet. As aforementioned, the consumer’s key points for consideration when choosing the provider is the price behind the data cap and internet speed. Therefore, a price list for 100 Mbit/s with unlimited data cap has been retrieved and consolidated into a graph (Tarifon, 2021).
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Figure 14 Monthly price for 100 Mbit/s of internet connection speed, Source:
(Tarifon, 2021, Author)
As can be seen on the graph, the price leader is T-Mobile with only 299 CZK per month, and O2 being on the 18th place with the 599 CZK per month offer. The average monthly price is 465.5 CZK. Even though it would seem that T-Mobile is ahead of its competitors, the real offer is 599 CZK, which would begin after the 6 months trial period costing the initial 299 CZK. Startel, Avonet, Poda and UVT on the other hand, offer the same price for the whole period, the only downside being the installation fee averaging around 1500 CZK. The other providers with the price starting from 450 CZK mostly do not require any installation fees. And O2 with one of the most highly priced offers has an insignificant installation fee of 100 CZK in relation to aforementioned providers.
When summarising the above-mentioned points, it is fair to say that the extent of rivalry is high, due to the huge number of competing companies, which are majorly differentiated. As the key multinational players only possess a quarter of the market share with their primary connection technology, the local companies have more than half of it.
Threat of new entrants
To better understand the threat of new entrants the costs of entrance and possible players with such capabilities have been analysed.
An entry of a small regional provider may include disruption among the other local providers, but small impact would be imposed on O2’s operations. However, over the years these smaller companies have been merging or acquisitioning others, the latest being the PODA
