Kosovo’s Largest Foreign Investment Sets Tone for Innovation

In a market saturated with tech-savvy youth demanding the coolest and expecting the best, IPKO is listening as one of Kosovo’s most innovative firms. By taking the perpetual pulse of the market’s Western lean the company is doing more than providing telecom services, they are allowing their users to insinuate themselves into the company’s very business model, and it’s paying off. The American Times sits down with IPKO CEO, Mr. Robert Erzin and PR Director, Mr. Alban Kastrati, to delve deeper into current successes and future developments.

 

Company Snapshot

The brand IPKO was an internet (ISP) and analog television start-up initiated by local businessmen in 1999 until 2006-07 when Telekom Slovenia acquired the company by taking over the controlling share. It’s at this time we managed to win a second license as a mobile operator and from there things grew rapidly. The network was built in a matter of 3-4 months and went from zero to 300,000 customers in about the same amount of time.

What led to such a successful debut in the mobile market?

At the time of our entry the state-run operator (PTK/Vala) enjoyed the majority of the market; as such, prices were at extremely high levels. To put the scenario prior to our arrival into perspective, a single SIM card could cost as much as a 1 week holiday on the seaside. Imagine having to make that kind of decision. It was the basics of business at play; competition normalizes prices and we were something new, something exciting to the customers.

Where does the company’s market share stand today?

We command roughly 50% of the fixed network (DTV, CATV) and internet with more than 34% of the mobile market as well.

What role does technology play in the maintenance of that market share?

We have proven ourselves as a market player by leading development through technology within the telecommunications sector. IPKO is the first and only operator offering 3G in Kosovo. Moreover, we are among the few European operators that are combining 3G technology with WiFi offload. What this means is that people can move seamlessly from 3G to Wifi and communicate freely with each other while enjoying an extra 5GB at no charge.

In regards to our fixed network, we’ve done a complete overhaul in the past three years by adopting the latest technology available, enabling us to offer the fastest internet speed in the country on par with EU averages. With our broad network, IPKO has helped position Kosovo as a modern nation, where the high rate of penetration and use of internet remains a strong social indicator.

IPKO Press Conference with PR Director, Mr. Alban Kastrati (L) and CEO, Mr. Robert Erzin

It appears you are making great strides through technological innovation as well as in marketing…How aggressive is competition?

With 50% of the fixed market we are in a solid position to maintain. As a service provider with the largest number of connections and network reach we continue to increase revenues and market share; specifically, last year when we moved from 44% to 50%. Overall, competition is tough in regards to price. We are talking about an environment that three years ago, when I first came to Kosovo, prices were around €30 per MB, whereas, today those prices can be 10x less. As a result, we try to focus on quality from customer care to upgrading our infrastructure and services.

On the mobile side, the market environment is even more competitive for us as we were late comers in that segment. Exacerbating this further was when Vala, shortly after our mobile license in 2008, made what I thought was a clever move when they already commanded an 80% market share. They made prices very high for outside the network calls and very cheap when within network.

Generally, the competition from new technologies poses a more aggressive challenge than our direct competition. But even with all these factors our EBITDA is very stable.

 

  • September 15, 2010: Begin offering Facebook Zero- Free of charge access to Facebook’s basic format for all IPKO mobile users
  • March 12, 2012: Twitter SMS made available to IPKO subscribers in Kosovo – Official tweet from Twitter
  • April 28, 2014: Launched Wikipedia Zero which offers IPKO users free mobile access to world’s largest online encyclopedia
  • May 16, 2014: Announcement of official partnership with Apple making IPKO the Exclusive Carrier of the iPhone in Kosovo

 

So your focus is to never compete on price?

Occasionally, we run acquisition campaigns to get new customers, but we are committed in refraining from price wars. We focus on delivering high quality, innovative services and tailor made products for different market segments, from youth to B2B; the latter of which we see a lot of potential for in the future. Every year we are earning less revenues, due to a decrease in international calls and we need to compensate through these efforts. The business model is going from voice to data, and we try to stay focused on the trends.

How is the overall business environment in Kosovo?

I think more could be done on the education system by creating a stronger knowledge base in the market. But even as the situation stands today, we have some fantastically skilled people, especially technicians at IPKO. What we miss, I think, is the managerial aptitude which makes it hard for us to find human resources with those much-needed soft skills.

At a governmental level a favorable legislation is developing, but still, institutional framework needs further development, specifically in the courts. But these are problems in many emerging countries. Despite all the challenges, and at times, lack of harmonization of laws and sub-laws between local and central government, we are moving forward. So far we’ve managed to connect all major cities of Kosovo to our fiber network within the span of a year, which proved to be effective, even at times when implementation of legal framework was behind market developments.

What are some challenges in the market you have faced in the past and more importantly in the present?

The market is actually quite challenging. First of all, Kosovo’s mobile market is pre-paid as people tend to be reluctant to engage in long-term contracts. With the B2B segment we do not face this issue, but residential is a challenge in that regard and banks offer payment plan solutions to clients instead, this is how it works.

A moment ago I mentioned a decline in international calls; this comes from factors beyond our control. Namely, from international terminations which we relied heavily on in the past, to the tune of about 35-40% of revenue and this stems from the large volume of incoming calls from diaspora. This was especially true in 2009 and 2010. However, over the past few years we’ve seen a notable decrease in international terminations to the point where in 2014 our revenue from this stream will be only about 15%. This is a significant figure because it was almost pure profit as there were no direct costs, we simply fielded the call. Despite these tremendous changes, our revenues and EBITDA remained stable; in fact, both grew during these past 4 years.

Around this period when international terminations began to drop off we experienced several other setbacks. A new player, Z-Mobile, appeared as a virtual operator, we were confronted with some issues on the mobile side with a declining user base and also some challenges with our distribution partner. During this onslaught we went from a high of about 500,000 mobiles users to a bottom of about 330,000 users, all during the first 6-months of my post as CEO in 2011. You can imagine this period was quite difficult for us.

That’s a difficult trough to be in. How did you manage to pull out of this rut?

Somehow we managed to stabilize our business in 2011-12 and see an increase in our EBITDA. This was done by re-shaping our image to the customers by listening and examining their feedback. Additionally, we invested substantially in our fixed infrastructure as internet issues were a component to the previous year’s issues. After all this, last year in 2013 we started the year with 440,000 fixed users and ended the year with 555,000 users with Q4 alone adding 10%.

That is a substantial spike in growth regardless of industry…

When you start the process of working on customer service through ongoing dialogue and analysis of their experiences you see results render themselves in the long run. But it’s not only this; in 2012 we launched a program for the youth segment of customers here in Kosovo through our youth brand “HEY [HEJ]” and then of course in 2013 there was the introduction of 3G. Simply stated, we were just doing some novel things that weren’t present in the past.

Importantly, we also secured several exclusive contracts with many of the sports [soccer] leagues in Europe that offer viewers of our fixed services fantastic content. Moreover, our partners in Albania are developing great content for us with a focus on Kosovar tastes by producing some really great shows for our users. In the end, we have 40 exclusive channels on our platform that our Albanian partners buy the rights too as well as producing their own programs. Overall, this recipe I think is what led us to that triumphant year.

You mention ‘Kosovar tastes’. Give us a flavor of their mindsets.

A key notion to recognize in Kosovo is that people tend to be early adaptors. If something goes to market in the US within a month people will be picking it up here in Kosovo. Beyond that, people like to show off what they got, from the clothes they wear to the cars they drive to the restaurants they eat at. IPKO understands the culture and when you couple that with the large youth population I believe we are in a position to continue to offer the best services and latest technologies to perpetuate those cultural traits into our business model.

As an expat from Slovenia, how do you find life in Kosovo?

I find people here open and friendly. I really enjoy my time here, when I am here. My family is back in Slovenia so I travel there every weekend and when I am here I dedicate a lot of time to my position. There is one thing that is obvious here; people keep a tight family unit and are less individualistic than many other countries I’ve visited. I think that is a positive thing. Moreover, I think people are relatively happy. In fact, not long ago there was a poll that ranked Kosovo among the most optimistic countries in the world, again, undoubtedly due to the large youth population.

When you hear stories about Kosovo being unsafe or undesirable and then come here and see people happy and ultra-social you tend to ask yourself where these stories are coming from!

Please offer our readers a brief synopsis on “Why Kosovo?”

I think their young population offers great potential for companies in the future as they are eager to learn, especially in our sector. Additionally, I’d mention that Kosovo has a nice central location easily accessible to other locations in Europe and the cost of labor is very low, as well as taxes on profit.

Furthermore, all prospects interested in this market must consider that Kosovo is closely linked to neighboring Albania, and has a large amount of Diaspora in Western Europe and beyond, which contributes to the market significantly and serves to empower the local economy.

 

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