BCG Study: Serbia

Great opportunities for Youth

On an ongoing basis, running an Internet business is cheaper, as many processes can be automated, with no need to pay staff or rent. This is particularly important for young entrepreneurs, as an automated website enables them to continue to study or work while running their businesses. Internet marketing is also cheap and global, and some of the most effective campaigns have been viral marketing initiatives that cost almost no money, relative to traditional media advertising


By WAVE Team
from Belgrade, SERBIA


Serbia has seen rapid Internet growth over the last few years. For example, there has been a 34% annual growth rate in the number of households with Internet connections since 2006, rising from 0.5M to 0.8M over 2 years. Within this healthy overall uptrend, it is worrying to note that the annual growth rate fell from 43% in 2007 to 26% in 2008.

This has driven the number of Internet users as a 7% of total population up to 32%, which is broadly in line with regional peers such as Bosnia, and even Romania and Bulgaria. However, it is still behind regional leaders such as Slovenia, Croatia and Macedonia, and also significantly below the European average of 49%.

This growth in penetration has been fueled by increasing competition amongst a growing pool of providers, with over 200 ISPs registered in 2007. This has also driven down access prices by 13% p.a. between 2006 and 2008. However, experts believe that the limitations of Serbia's fixed line infrastructure pose a threat to continued growth, and according to some reports, there are already backlogs of up to 300K customers waiting to be connected. The incumbent, Telekom Serbia, has been operating the fixed line monopoly, and the lack of competition has reduced pressure to improve quality or reduce prices. Further enhancements to the fixed line infrastructure, in terms of quality or coverage, are likely to be held back by the high costs.

In view of these constraints, the next wave of Internet growth could be driven instead by wireless access technologies. International experience has shown that wireless broadband can quickly and relatively cheaply spread the benefits of the Internet, particularly in sparsely populated rural areas. Although the download speeds are limited relative to fixed line technologies, wireless compensates for this with its lower construction cost, shorter timeline for rollout, and lower costs for end users. Wireless broadband has also been shown to provide an additional boost to business productivity, strengthening the value proposition for potential adopters.

- One of the strategic objectives of Telenor in Serbia is to be the leader in mobile broadband internet, so our investments in the network go in that direction. Telenor's 3G network currently covers more than 200 cities and larger towns in Serbia. At the same time, it represents a good basis for moving towards fourth-generation networks that will allow even greater speed of data flow, or faster Internet traffic. The final goal is that all the citizens of Serbia have Internet access - says Sandra Štajner, Chief Communications Officer of Telenor Serbia, for WAVE magazine. - Accordingly Telenor is contributing with large number of projects to accelerate Serbian way towards the group of developed countries when it comes to IT literacy and Internet access. One of such projects are also Internet parks, where all the visitors are able to use the Internet for free.

Services such as Telenor prepaid or postpaid Internet are simple solutions for Internet access, and allows users mobility and speed, regardless the place where they are.

Social benefits

Two issues have been identified as areas of concern for Serbia: jobs and the community, and the aspirations of the youths.

While the Internet is not a miracle panacea for all these issues, it can help to mitigate these concerns by creating jobs. At a more individual level, the Internet can stimulate entrepreneurship. The Internet can increase the returns to starting a business, while at the same time decreasing the risks. Widespread Internet penetration increases the number of customers that can be accessed online. A similar concept on a smaller scale is the option to telework, or to work from home.

Enhancing the quality of education in Serbia has been identified as a key objective of the National Youth Strategy. One example of an Internet solution to improve the quality of education is to conduct lectures and lessons by video conference, using high-speed Internet connections to broadcast the session in real time to multiple classes of students. Such sessions can be made interactive, with the use of presentation material and opportunities or question and answer sessions. The Internet can also be used to access technical or scientific equipment that schools individually cannot afford, such as electron microscopes. Teachers report that such sessions are beneficial for students as they demonstrate the real-life practical uses of the theory lessons.

The Internet will also facilitate youth entrepreneurship by reducing the risk involved in starting a new business and increasing the potential rewards. The Internet can lower entry and exit barriers for new businesses, since an online store or website can cost just a few dollars a month, whereas a physical store or office will cost hundreds or even thousands. The Internet also makes it easier to start and run a business, with infrastructure such as payment providers and information on running a business readily available. On an ongoing basis, running an Internet business is also cheaper, as many processes can be automated, with no need to pay staff or rent. This is particularly important for young entrepreneurs, as an automated website enables them to continue to study or work while running their businesses. Internet marketing is also cheap and global, and some of the most effective campaigns have been viral marketing initiatives that cost almost no money, relative to traditional media advertising.


(Published: 11.10.2009.)