There are over ten million SME (Small/Medium-sized Enterprise) companies across

the five countries profiled in this report, making up a substantial part of their total

telecoms market value of over €178 billion.

SMEs represent an important market for service providers as they employ a majority

of the people that work across the European Union and are broadly seen as the engine

of economic growth. Within the SME market there is a very wide range of

communications requirements and dependency – ranging from the self-employed

plumber relying of their mobile to the advertising company with interconnected

offices around the world.

As there is such a variety of customers, it can be difficult for service providers to

assemble the right product portfolio and communicate the appropriate messages to

their target customers, although there has been considerable progress since markets

were liberalised. That having been said, there remains a distinct tendency for service

providers to offer similar products using similar messages, which has contributed in

part to commoditisation and price competition.

In the past year the market has continued to evolve at some pace, with significant

consolidation taking place in all countries and amongst larger players (consolidation

at this level has been long anticipated but slow in materialising). Although this has

resulted in a narrower choice of providers for customers, it is probably good news in

the longer run as it will result in a more stable supply side.

Most European markets remain dominated by the incumbent PTT, with a tendency for

there to be two or more national competitors, together with a host of smaller players

with a niche target market and complemented by a vibrant reseller market.

There are also a few players with operations across multiple countries. Some of these

have grown organically, others are more piecemeal and have been assembled through

a range of acquisitions. Their number has also been swelled by service providers that

have historically been focused on the market for larger corporate customers moving

into the SME market. This move is driven by the twin forces of saturation in their

core market and the growing availability of products from higher up the value chain to

smaller businesses – driven in large part by the continued explosion of broadband

across the continent.

These on-going competitive forces and technological advances mean that SMEs are

getting ever better value for money and value-added products, which in turn helps

them to compete and drive economic growth. It looks like this virtuous circle is set to

continue in the year ahead, although service providers will continue to face stiff

competition from one another.