Land of the rising SUN: Modern telecommunications in Moldova

By Claire Ricklefs

EBRD funding has helped SUN Communications, Moldova's leading private television operator in Moldova, expand and develop telecommunications technology in a country that lacks a modern telecommunications infrastructure.

Can you imagine life without a telephone or even worse without your mobile? Three out of 4 Moldovans currently have no fixed telephone line at home, while only a third of the population has a mobile phone subscription. Computer and internet coverage in Moldova is also at an early stage, with surveys showing that out of a population of 3.6 million, only 12 per cent have access to the internet and as few as 6 per cent have a computer at home.

A similar picture emerges in terms of choice between television programmes, as only 1 in 20 Moldovans is connected to cable television services. But change is on the way.

With more than 75,000 customers, SUN Communications is the leading private cable television operator in Moldova and well placed to tap into this market potential. It provides up to 70 television channels and is the only local and private telecoms company to have developed networks that can also provide broadband web access. Last year, SUN became the first privately owned, fixed-line telecommunications company in Moldova, to construct its own international network, connecting directly with an international carrier in Romania.

EBRD funding brings Moldova into the 21st century

But expanding and developing modern telecommunications technology requires money. “We could not do this on our own,” says John Maxemchuk, the company’s General Director. “In the last three years, we felt financial constraints as we expanded into new services, such as high-speed internet, and into new territories. We are simply growing faster than our operating cash flow can support. We need a new partner.”

This is where the EBRD stepped in with a combined US$ 4 million equity and US$ 4 million debt financing package. “This investment will allow SUN to grow and compete on a national level with a package of services suitable for the 21st century,” Mr Maxemchuck says. The funds will be channelled towards upgrading the cable television networks and extending the transmission infrastructure to the country’s 10 largest municipalities. SUN also plans to expand its coverage through the acquisition and modernisation of smaller cable providers. “The Bank’s investment provided an excellent opportunity to support a successful private enterprise,” says Michelle Senegal de Fonseca, the EBRD’s Director of Telecommunications. “It is expected to have a significant impact through increased competition which will offer Moldovian customers greater choice at fair prices.” Indeed, if the country’s appetite for the newest telecommunication technologies is anything to go by, the potential for growth in it's telecommunications market must be enormous. The telecoms sector is the most dynamic in the country’s economy, growing by more than 35 per cent annually. So why have so few Moldovans felt the benefits so far? Leaving aside the low but increasing purchasing power, the other obvious answer is limited competition.

Boosting the private sector

State-owned Moldtelecom dominates the fixed telephone and internet services market, making it difficult for private companies to compete. In contrast, the cable television market is extremely fragmented, with more than 180 registered cable television companies. In the past, SUN has been constrained in its development due to the dominant state-owned operator on one side and a number of cash-based competitors, said to be operating at the edge of the law, on the other. “Our efforts at reforming the market have had marginal success but are starting to accelerate with the increasing involvement of the international community and expansion of the EU onto our western border,” says Mr Maxemchuk. In order to further support modernisation efforts, the Bank is currently devising a technical assistance programme, which will assist the country in developing and enforcing the necessary telecoms regulation.

“We welcome the support and added emphasis of EBRD’s voice and global reputation in this effort,” says Mr Maxemchuk. “I am certain we will see great improvements in the competitive environment in Moldova in the next few years.” Dan Stefanescu, who has led this project on behalf of the EBRD, says that expanding a culture of transparent business in the local market has been one of the key aims for the Bank and counted just as much as the actual physical market growth. “What we appreciate most is the management’s determination to step out of the old business standards and to make a significant effort in turning SUN into a modern enterprise, even if this implies considerable efforts,” Mr Stefanescu stresses. “We are looking forward to helping SUN continue to rise and shine.”