Team 9: Ömer Aydemir

Team 9: Ömer Aydemir

Cihan Kalayci

Aryan Shor

Project:KPN Internationalisering

Date: Mei 2010

Contact: Ömer Aydemir

0624816949

Management summary

The purpose of this report is to show the opportunities for KPN in Belgium, Bosnia and Herzegovina, Estonia and Portugal. We have analyzed these countries on their economy, transport, finance and industry. Finally we described the opportunities for each country.

After a comparison of the countries we decided to advice KPN to invest in Portugal. The main reasons for our decision are below:

The Portuguese market is larger than it may initially appear.There may only be 10.6 million people in Portugal, but there are well over 200 million people who speak Portuguese worldwide.Former Portuguese colonies, including Macau, Mozambique, Angola and Brazil, have close business ties with Portugal. KPN can often find avenues to these other markets through Portugal.Portugal also has one of the highest mobile phone penetration in the world and one of the highest internet usage in Europe. This means that there is demand for network services. KPN can offer private network for companies and private customers.

It is well-known that there are many technology and science parks in Portugal like MadeiraSciencePark and LisbonTechnologyPark. Companies which want to establish their businesses in these regions need their own networks. KPN can offer these companies high quality and private networks.

Compared with Estonia, Portugal has much more residents (10.3 million) which means a large potential market for KPN. Portugal is an emerging economy, backed by EU funding and ever increasing foreign investment.Portugal has also a market-oriented government, whose policies are pro-business and pro-foreign. It grants foreign investors equal access to all country’s economic sectors. KPN can profit of al these advantages when they establish themselves in Portugal.

KPN has Great opportunities for starting a business in Portugal. KPN can enter the market via merger or acquisition of a smaller company in Portugal, which has established a knowledge and customer portfolio.

The best opponent of Portugal in this research is Estonia, but due to the small population, which means a small potential market, we didn’t advice KPN to invest in Estonia in short term. But after Portugal, Estonia has the most potential and is the most attractive country for KPN to invest.

Introduction

We were asked to make a strategic analyses of Belgium, Bosnia and Herzegovina, Estonia and Portugal for the benefit of KPN.

Our central question is: ‘’ Which country has the most potential for KPN to invest in?.

To answer this question we analyzed these countries on their economy, transport, finance and industry (specifically IT and telecommunication). Finally we compared the countries and gave a strategic advice for KPN.

We want thank Mr. Halmans for his co-operation.

Enjoy reading !

Index

Management summary blz. 2

Introduction blz. 3

1.Belgium blz. 5

1.1Introduction blz. 5

1.2Transport blz. 5

1.3 Finance blz. 6

1.4 Industry blz. 7

1.5Opportunities of Belgium blz. 9

2.Bosnia and Herzegovina blz. 10

2.1Introduction blz. 10

2.2 Transport blz. 11

2.3Finance blz. 11

2.4Industry blz. 12

2.5Opportunities of Bosnia and Herzegovinablz. 14

3.Estoniablz. 15

3.1Introduction blz. 15

3.2 Transport blz. 15

3.3Finance blz. 16

3.4Industry blz. 17

3.5Opportunities of Estonia blz. 19

4.Portugalblz. 21
4.1Introduction blz. 21

4.2 Transport blz. 21

4.3Finance blz. 22

4.4Industry blz. 23

4.5Opportunities of Portugal blz. 25

5.Strategic adviceblz. 26

1.Belgium

1.1 Introduction

The Kingdom of Belgium is a country in northwest Europe. It is a founding member of the European Union and hosts its headquarters, as well as those of other major international organizations, including NATO. Belgium covers an area of 30,528square km and has a population of about 10.7 million, its capital is Brussels.

Belgium is home to two main linguistic groups, the Flemish and the French-speakers, mostly Walloons, plus a small group of German-speakers. Belgium's two largest regions are the Dutch-speaking region of Flanders in the north and the French-speaking southern region of Wallonia. Belgium's linguistic diversity and related political and cultural conflicts are reflected in the political history and a complex system of government. [1]

Economy

Belgium has a modern, private-enterprise economy which has capitalized on its central geographic location, highly developed transport network, and diversified industrial and commercial base. Industry is concentrated mainly in the populous Flemish area in the north. With few natural resources, Belgium must import substantial quantities of raw materials and export a large volume of manufactures, making its economy vulnerable to volatility in world markets. Roughly three-quarters of Belgium's trade is with other EU countries and its overall current account deficit widened to 4% of GDP in 2009. Public debt is nearly 100% of GDP. On the positive side, income distribution is relatively equal and the government succeeded in balancing its budget during the 2000-2008 period. In 2009 Belgian GDP contracted by 3.1%, the unemployment rate rose slightly, and the budget deficit worsened because of large-scale bail-outs in the financial sector. Belgian banks have been severely affected by the international financial crisis with three major banks all receiving capital injections from the government. An ageing population and rising social expenditures are also increasing pressure on public finances, making it likely the government will need to implement unpopular austerity measures to restore fiscal balance.[2]

1.2 Transport

Transport in Belgium is facilitated with well-developed road, air, rail and water networks. Below an overview.

Aviation

There are a total of 43 airports in Belgium, 27 of which have paved runways. Airplane passengers in Belgium can use 5 airports, the largest of which is the BrusselsNationalAirport. Other airports are military airports or small civil airports with no scheduled flights. Belgium has also 1 heliport.

Railways

total: 3,233 km

standard gauge: 3,233 km 1.435-m gauge (2,950 km electrified) (2008).

Urban rail

An urban commuter rail network is currently being set up in and around Brussels, GEN (Gewestelijk Express Netwerk) in Dutch. It was initially supposed to be set in service in 2012, but some observers expect it not to be ready before 2016. A total of 8 lines should be in service.

Roadways

total: 152,256 km

paved: 119,079 km (includes 1,763 km of expressways)

unpaved: 33,177 km (2006)

Waterways

2,043 km (1,528 km in regular commercial use) (2008).

Ports and terminals

Antwerp, Gent, Liege and Zeebrugge. The ports of Antwerp and Bruges-Zeebrugge are two of the biggest seaports in Europe. The port of Antwerp is also one of the busiest ports of the world and port Zeebrugge is one of the busiest of Europe. [3]

1.3 Finance

Budget

revenues: $204.9 billion

expenditures: $230.9 billion (2009 est.)

The Belgian economy was severely hit by the worldwide recession in 2009. The economy shrank by 3 percent, which is the sharpest decrease seen since World War II, according to the Annual Report of the Belgian National Bank. The Bank also foresees the Belgian economy growing by 1 percent in 2010, supported by government action taken to strengthen the economy.

Belgium’s GDP in 2009 was € 337,75 billion (current currency exchange rate), while the budget deficit increased up to 6 percent. In addition, 64.000 jobs were lost.[4]

Banking

Belgium has a well-developed and sophisticated banking system. The four main banks based in Belgium are ING Belgium, Dexia Bank, Fortis Bank and KBC. A full range of financial services are offered, with special account facilities for non-Belgian nationals. Banking services are also available foreign banks. Banking hours are normally 9.00 a.m. to 4.00 p.m. Monday to Friday.[5]

Leading life insurance companies in Belgium are as follow:

Ethias Life Insurance, Les Assurances de Fortis Banque Insurance, AXA Belgium Insurance, Fortis AG, ING Insurance, AGF Belgium Insurance, Delta Lioyd Life Insurance.

Major Non-Life Insurance companies in Belgium are as follows:

AXA Belgium Insurance, Fortis AG Insurance, KBC Assurances, ING Insurance, AGF BelgiumInsurance, DKV Belgium Insurance. [6]

Tax policy
The Belgian tax legislation provides economic players with a generally applicable advance 'ruling' practice. This procedure is rapid and efficient. The ruling is takes three months and the ruling decision is legally binding for up to five years. The ruling includes the various fiscal measures that can be used to lower the tax base or cost. The nominal tax rate is 33.99%. For small and medium-sized enterprises (SMEs) with a taxable profit not exceeding €322,500, the tax rate drops to 24.98% at the lower end of the tax scale. Legal mechanisms make it possible to lower the nominal rate.
One of the most popular measures is the notional interest deduction. Belgium is the only European country to temper the differences in tax treatment between finance raised through venture capital and finance raised through borrowed capital. It allows companies to deduct a notional charge (not stated in the accounts) from their tax base that corresponds to a specific percentage of their 'adjusted' equity capital.
These pro-business tax incentives make Belgium one of the most attractive places to set up a business. [7]

1.4 Industry

GDP - composition by sector
agriculture: 0.8%
industry: 24.5%
services: 74.7% (2009 est.)

IT

The Belgian ICT sector includes the hardware, software and telecommunications markets and new technologies (Internet, e-commerce, e-government, new media).

It represents more than 4% of Belgian GDP and between 1997 and 2007, it accounted for one sixth of the growth of the GDP.

Belgium has an excellent network infrastructure. Due to the competitive market of fixed network more than 99% of households have access to a coaxial network or a copper wire network. More than 70% of the population can use a download speed of 20 megabytes per second and the optical fiber is also developing. In mobile networks Belgium has already a 3G network coverage of 90% and also the move to 4G networks will soon be realised.

In 2007 the ICT sector grew by 2 % in Belgium. The companies that are mainly focused on IT solutions performed better than the average for the last three years. The main growth factor was the increasing outsourcing of IT activities in all sectors. Also development and sales of software were increasing.

The telecom operators developed less than the industry average, but remained still growing. The growth is due to the multiple offering (fixed telephony, broadband Internet, television, mobile phones) and interactive digital television.

New technical opportunities in the ICT sector offer new opportunities. Examples include the electronic identity card, RFID (radio frequency identification) and e-health (the set of IT applications in the health sector).

An important development in the Belgian ICT sector is the increasing outsourcing of ICT activities to specialist suppliers. Responsibility for the bandwidth, processing capacity, the storage of data and the helpdesk are in many cases transferred by the users to the IT supplier. Also applications (such as network security, software development and maintenance of the customer and information exchange) and even entire business processes (booking and ticketing, personnel management) are outsourced.[8]

Brussels is one of the main ICT cities in Belgium. One third of ICT companies in Belgium are led from Brussels. It is one of the ten major cities for Internet activities and one of the twenty most important telecommunication headquarters in Europe. The ICT sector in Brussels accounts for about 2000 companies, 30.000 employees and an annual turnover of 4.5 billion Euros.[9]

Telecommunication
Belgium – Key telecom parameters – 2004; 2008

Sector / 2004 / 2008
Fixed-line services:
Total subscribers (million) / 4.8 / 4.1
Annual change / -6% / -9%
Fixed-line penetration (population) / 47% / 40%
Broadband:
Subscribers (million) / 1.67 / 2.93
Annual change / 30% / 13%
Broadband penetration (population) / 16.2% / 27.6%
Mobile services:
Total subscribers (million) / 8.49 / 11.34
Annual change / 5% / 7.7%
Mobile penetration (population) / 78% / 108%

Some facts about the Belgian telecom industry:

• In early 2009 about 27% of broadband subscribers had data speeds of 10Mb/s or higher – one of the highest proportions in the EU. Some 61% of subscribers had data rates of between 2Mb/s and 10Mb/s.
• IPTV penetration is considerably higher than most other EU countries. Belgacom is one of the three largest IPTV operators in Europe, with its success partly due to its high spending on broadcast rights for football competitions.
• Belgium’s market for bundled services remains relatively immature, with only about 5% of the population subscribed to double play services and less than 1% to triple play services. There are only three operators providing triple play, and about 14 providing double play. Given the competition between the main players Telenet, Tele 2, Scarlet and Mobistar there remains much potential growth for converged services, with a consequent price squeeze benefiting consumers.
• Growth in mobile services revenue has been affected by price reductions resulting from increased competition, as well as several regulatory measures. As a result, about a third of Belgians have dispensed with fixed lines in favour of mobile-only solutions. The widespread availability of HSPA has encouraged consumer take-up of mobile broadband and data services.[10]

1.5 Opportunities of Belgium

• Economic location: at the center of a large and prosperous EU customer base
• Access to European centers of decision making
• A tradition of trade: more than 85% of Belgian GDP exported
• One of the most popular destinations for foreign investment
• Access to high quality labor force
• A center of knowledge
• Modern & efficient business infrastructure
• Low real estate costs
• Attractive tax regime
• Easy business Set-up. In Belgium you can have your business set-up and working in three days.

2.Bosnia and Herzegovina

2.1 Introduction

Bosnia and Herzegovina is a country in South-East Europe. It is bordered to Croatia, Serbia and Montenegro. The country has a diverse landscape. It is mostly mountainous, centrally to the south, in the northwest it is hilly and flatland in the northeast part of Bosnia. It has a moderate climate with hot summers and cold winters with much snow. But the south of the country has a much more Mediterranean climate.

There are three ethnic groups in Bosnia. The largest group is called Bosniaks, the second group are the Bosnian Serbs and the Bosnian Croats are the third group.

Bosnia is a politically decentralized country that gained its independence during the Bosnian war in the early 90s. It is now a democratic country that has a market-oriented economy and a candidate for membership in the EU and NATO. Bosnia is also one of the founding members of the Mediterranean Union since 13 July 2008. [11]

Economy

Due to the civil war, the slowly built economy of Bosnia is completely destroyed. Nearly 80% of the industry was destroyed and huge parts of the land became unusable for agriculture. The infrastructure was almost disappeared and almost half of the population left the country. After the war was ended, the country began to built its economy again with international economic support.

Economic growth
In recent years, the economy of Bosnia and Herzegovina has shown a nice growth. The growth was driven primarily by strong growth in private consumption. The increase in consumer spending at a relatively low level, was driven by an increase in real wages and a substantial growth of consumer credit. Also government projects in infrastructure and exports stimulated the economic growth. Following an economic depression in 2009, the EIU expects the 2010 and 2011 economic recovery[12].

Main industries in Bosnia include: steel, coal, iron ore, lead, zinc, manganese, bauxite, vehicle assembly, textiles, tobacco products, wooden furniture, tank and aircraft assembly, domestic appliances, oil refining

The main trading partners for exports are Croatia 20.7%, Slovenia 16.7%, Italy 16.6%, Germany 13%, Austria 10.3%, Hungary 4.8%.

The main exports are industrial products (aluminium), raw materials, transport equipment and machinery.
The main trading partners for imports are Croatia 24.3%, Slovenia 12.6%, Germany 12.1%, Italy 10.4%, Hungary 6.5%, Turkey 6.4%, Austria 6.2% (2008)

The main imports are machinery and transport equipment, industrial products, food and live animals[13].

2008 / 2009
GDP( Purchasing Power parity / $30.12 billion / $29.25 billion
GDP real growth rate / 5.5% / -2.9%
GDP per capita / $6,600 / $6,300
Exports / $5.194 billion / $3.95 billion
Imports / $12.29 billion / $8.82 billion

2.2Transport

Roadways total: 21,846 kmpaved: 11,425 km (4,686 km of interurban roads)unpaved: 10,421 km (2006)

Road transport accounts for most of the movement of goods and people around and through BiH, as rail travel is limited and air travel is still quite expensive by local standards. Generally speaking, most main two-lane paved roads are in good condition, but even these roads are difficult to maintain in winter. Negotiations to upgrade the European corridor via Croatia between Hungary and the coast of BiH, Neum, continue.[14]

Ports and harboursBosanska Gradiska, Bosanski Brod, Bosanski Samac, and Brcko (all inland waterway ports on the Sava none of which are fully operational), Orasje

Airports - with paved runwaystotal: 72,438 to 3,047 m: 41,524 to 2,437 m: 1under 914 m: 2 (2008)

Airports - with unpaved runwaystotal: 181,524 to 2,437 m: 1914 to 1,523 m: 7under 914 m: 10 (2008)[15]

2.3Finance

Monetary policy
The Central Bank of Bosnia and Herzegovina is the only issuer of currency and executor of monetary policy. The Bosnian currency, the convertible marka Bosnian (BAM), is pegged to the euro at a rate of 1 euro to 1.96 BAM. By the fixed exchange rate, the Central Bank limited monetary policy instruments.

In October 2008, the Central Bank reduced the obligatory reserve rate for commercial banks from 18 to 14 %, hoping to generate more liquidity.
The local banks in the Federation and Republika Srpska still operate independently. Meanwhile there is a Memorandum of Understanding on Cooperation signed with the Central Bank of Bosnia and Herzegovina. In addition, they began to monitor the micro-finance and leasing companies. These have grown the last few years enormously[16].

Tax policy
The administration of taxation in BiH is very decentralized and takes place on Entity, cantonal or municipal level. VAT is harmonized and fixed at 17 percent. This is collected by the Indirect Taxation Authority. Corporation tax is 10 percent very low.
In September 2008 the law was passed establishing the National Fiscal Council (NFC).This aims to monitor the complex tax structure of the country