Prague, March 10, 2005 -- The fixed-line markets of Central and Eastern Europe (Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia) contracted slightly last year. According to a new IDC study, the number of fixed-line connections dwindled in 2004 by a half percent year-on-year to 32.88 million and total telephony spending fell by 0.83% to $8.04 billion. Although mobile substitution continues apace and is the primary reason for the decline of the fixed-line telephony market, voice over IP has also played a significant role, though its full effect will not be realized for several years.

"Falling prices and heightened competition for voice services means the fixed-line telephony business is moving towards a low-cost utility model," says Emir Halilovic, Senior Analyst, IDC's CEE Communications Group. "Nevertheless, the total number of connections should remain about level. Although DSL has taken off across the region and many residential and business customers are electing to use it over dial-up or ISDN, DSL often serves as an incentive for residential customers to maintain their telephone lines, as the technology requires them to be in place anyway."

But revenue and use has already started declining. According to IDC, spending by both residential and business customers shrunk in 2004. While total residential spending on telephony contracted by less than a half percent, on voice calls, spending fell by nearly 5% compared to 2003. By contrast, in the business sector, spending slipped by 1.3% on total telephony and 3.6% on calls. In terms of traffic, in 2004, only Poland and Bulgaria saw an increase in the total number of minutes, by 1.4% and 0.8% respectively. In every other country covered in IDC's study, there were fewer telephony minutes than in the previous year, with traffic in the Czech Republic out in front with a 14.5% plunge in the total number of minutes.

"The most dramatic contraction, however, was with spending on Internet dial-up among businesses," says Halilovic, "which dropped by 19% last year across the region. More and more, businesses and eventually residential users will turn away from regular dial-up and ISDN in favor of broadband access options, which will also allow greater use of voice-over-IP."

The country with the largest population, Poland, also had the largest telephony market in 2004, accounting for 37.7% of connections in the region. Romania was a distant second with 13.4%. At third with 11.0%, Hungary edged out the Czech Republic, which was fourth with 10.5%. In terms of spending, Poland led the region with just over 40% of the total in 2004. Hungary was second with 13.5% and the Czech Republic was third with just under 12%.

IDC's Central and Eastern Europe Telephony Services 2005-2009 Forecast analyzes and forecasts the telephony market in eleven Central and Eastern European countries (Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia ) from 2003 through 2009. It covers PSTN and ISDN telephony access connections segmented by business and residential segments. Traffic is segmented by call destination and by market segment. Spending is segmented by call destination, connection and subscription, and market segment. The study answers the following questions: What are the trends in the telephony markets in Central and Eastern Europe? Which market segments and services are going to grow? Which are going to decline? How will expansion of the mobile markets and VoIP affect the fixed-line telephony markets?

For more information, please contact Mikhail Novikov (+7 495 975 00 42) in Russia, Ukraine, or any of the CIS countries; or Tatiana Hinova (+420 221 423 140) from anywhere else.

About IDC: Global Research with Local Content
IDC is the premier global market intelligence and advisory firm in the information technology and telecommunications industries. We analyze and predict technology trends so that our clients can make strategic, fact-based decisions on IT purchases and business strategy. Over 775 IDC analysts in 50 countries provide local expertise and insights on technology markets. For more than 40 years, business executives and IT managers have relied on our advice to make decisions that contribute to the success of their organizations.

For the Emerging Markets in the CEMA region, IDC retains a coordinated network of offices and agents in Budapest, Vienna, Moscow, Kiev, Minsk, Almaty, Warsaw, Bucharest, Sofia, Zagreb, Ljubljana, Istanbul, Johannesburg, and Tel Aviv, supported by regional research centers in Prague and Dubai.

IDC -- Celebrating 15 Years in Central and Eastern Europe
Since 1990 IDC has been delivering essential intelligence about the ICT markets of Central and Eastern Europe. From a single person in a small office, we've grown into the region's leading IT market research, events, and consulting firm, with analysts stationed in ten CEE countries.

For Central and Eastern Europe and the Middle East and Africa, IDC maintains a coordinated network of offices in 15 countries with regional research centers in Prague, Istanbul, and Dubai. Customers include a wide range of ICT hardware, software, and services suppliers, governments, and members of the financial community.