Telecom equipment industry’s role in Estonian economy is reaffirmed by the substantial revenues that it generates, as total market for the equipment products10 exceeds 125 MEUR11. Most of the production is channelled to exports – largest contribution to overall 1 billion EUR exports is made by Elcoteq, which accounts for approximately 96% of the total exports figure. Telecom equipment sector is the largest employer in ICT sector, offering job for more than 3850 workers. It is relatively knowledge intensive sector with 36% of people with diploma or B.A. degree and 5% possessing M.Sc. or equivalent12. Telecom equipment sector interacts with a number of other business activities, primarily with business and workflow management support, but also with customer relations, financial management and electronic transactions. Main products or services provided by the companies are multimedia-content and information systems next to telecom equipment and services. Most competitive one out of these is telecom equipment.

Predominantly, firms belonging to the sector have an experience as a subcontractor. Majority of orders are placed by Finnish and Swedish enterprises. On average subcontracting revenues constitute about 90-100% of turnover of smaller businesses. Yet, companies based on local capital are also less subcontracting orientated with the share of 20-30% of turnover. On the other hand, telecom companies are active in subcontracting other companies – their share of subcontracting costs is between typically 5-20% from turnover.

About half of telecom equipment providers are owned by foreign capital, ownership share is frequently 100% with owners originating from either Sweden or Finland. Approximately one third of telecom equipment enterprises have units abroad. However, headquarters are most common channel of internationalisation, meaning that the production plants here are mostly local representations. Few enterprises have headquarters in USA and other countries, as referred in the questionnaire. Sales representations or agencies are rare. Aside of Elcoteq a large share of equipment is produced for domestic market.

In the cluster framework main products demanded, but also supplied by other sectors are telecom equipment related. Communications and Internet was also mentioned on both input and output sides. As figure 4 indicated interactions are tight with manufacturing and computer services sectors.

Broadband

The strengths, weaknesses, opportunities and threats
This sector has no significant researchers and is dominated by the broadband service providers (109) and manufacturers. Internet (incl broadband) is mainly accessible in cities or nearby. Another strong point is that many local governments have set up initiatives for broadband access in countryside. The weakness of broadband sector is itslow-tech features. The main threat concerns also the possibility that also broadband is widely available it is not used as a value-added service for production or other sectors.

Relevant statistics

Table 2: Internet Access

RTDs and SMEs conducting R&D activities

Elion
Elion is another company belonging to Estonian Telekom holding group. The ownership structure is analogous to that of EMT. Elion as a private company was established in 1993 and has operated most of the time under the concession agreement conditions stipulated with Estonian government in 1992. Year 2001 marked the end of the concession, when free access to the market was enabled.

Elion is primarily specialised on offering data communication, internet and telephone solutions to companies and households. Elion has also established itself as the market leader for internet dial-up service and ADSL connections.

Elion is a substantial employer – in 2000 total of 2900 persons were employed by the company. However, inner restructuring process has had an effect on the number, as in 1998 the company employed 3700 persons. Total turnover of 171 MEUR in 2000 makes Elion the largest company on domestic ICT market, accounting for 32% of total ICT market and 46% of telecom market. Elion is manufacturer and supplier of these kind of services. Further information is available at www.elion.ee

Elisa
Elisa is a private capital based international telecommunications company founded in 1994 by Elisa Communications, Finland. Elisa offers a variety of telecom services with main orientation on mobile communication solutions. As for the end of 2000 Elisa had 137 000 subscribers, which comprise 25% of total number of mobile communications subscribers. By turnover, with 16 MEUR in 1999 Elisa had 7% of entire Estonian carrier services market. Elisa is the fastest growing telecom company in Estonia, gaining both high new subscribers rate as well as turnover growth rates. In 2001, revenues increased by 60% as compared to the same period in 2000, amounting already 40 MEUR. Elisa is manufacturer and supplier of these kind of services. Further information is available at www.elisa.ee

Starman
Starman is the third largest internet connection provider through cable-TV. Further information is available at www.starman.ee

Trade associations
Concerning the trade associations the overall ICT sector has only one association that concerns all. This is The Association of Estonian Information Technology and Telecommunications Companies. The contacts of the association are Endla 3, 10122 Tallinn, Estonia; Phone: +372 6307 300; Fax: +372 6311 323; E-mail: info@itl.ee; Http://www.itl.ee.

Mobile & Wireless

The strengths, weaknesses, opportunities and threats
This sector has significant researchers and is dominated by the broadband service providers and manufacturers. Mobile connection is available everywhere in the country and over 90% from entire population is using mobile phones. WiFi on the other hand is mainly freely accessible over 500 places in Estonia The only weakness in this sector is the fact that 3G mobile services are not yet fully available. There are no remarkable threats but the opportunity for mobile companies is to have even higher mobile phone user rate.

Relevant statistics

According to Statistical Office of Estonia (SOE), there were 1 347 000 inhabitants in Estonia in the beginning of 2005 from these persons 1 257 200 were mobile network service users. There are 507 public wireless areas all over the Estonia. Data about private wireless network is not accessible.

RTDs and SMEs conducting R&D activities

Elion
Elion is another company belonging to Estonian Telekom holding group. The ownership structure is analogous to that of EMT. Elion as a private company was established in 1993 and has operated most of the time under the concession agreement conditions stipulated with Estonian government in 1992. Year 2001 marked the end of the concession, when free access to the market was enabled.  

Elion is a substantial employer – in 2000 total of 2900 persons were employed by the company. However, inner restructuring process has had an effect on the number, as in 1998 the company employed 3700 persons. Total turnover of 171 MEUR in 2000 makes Elion the largest company on domestic ICT market, accounting for 32% of total ICT market and 46% of telecom market. Elion is manufacturer and supplier of these kind of services. Further information is available at www.elion.ee

Elisa
Elisa is a private capital based international telecommunications company founded in 1994 by Elisa Communications, Finland. Elisa offers a variety of telecom services with main orientation on mobile communication solutions. As for the end of 2000 Elisa had 137 000 subscribers, which comprise 25% of total number of mobile communications subscribers. By turnover, with 16 MEUR in 1999 Elisa had 7% of entire Estonian carrier services market. Elisa is the fastest growing telecom company in Estonia, gaining both high new subscribers rate as well as turnover growth rates. In 2001, revenues increased by 60% as compared to the same period in 2000, amounting already 40 MEUR. Elisa is manufacturer and supplier of these kind of services. Further information is available at www.elisa.ee

EMT
The largest Estonian mobile operator EMT is fully owned by Estonian Telekom, where the ownership is divided between Sonera (24,5%) and Telia Corporations (24,5%), and Estonian State (27,3%). The rest of shares belong to other private and corporate investors and are traded on Tallinn Stock Exchange.

EMT’s main field of activity is the establishment and maintenance of mobile communication networks and systems, and the sale and management of related services. As for 1999, the turnover of the company was 106 MEUR (20% of the ICT market turnover and 29% of the total telecom turnover) and the number of subscribers exceeded 320 0004 at the end of 2000. This figure gives EMT strong leadership as compared to other telecom operators, with subscribers based market share approaching 60%. EMT is main supplier, researcher and manufacturer of mobile services. Further information is available at www.emt.ee

Tele2
Tele2 (OÜ Levicom Broadband) - TELE2 is a telecommunication company providing telephone, Internet and cable TV services. Owners of Tele2 are TELE2 AB and Levicom International Holdings BV. TELE2 entered Estonian mobile communication market in 1999 by aquiring ownership in Q-GSM, operated by Levicom Broadband. In addition to involvement in mobile communications market, Tele2 has been actively fought for the position in distance call market. The 9 month consolidated turnover of the Group in 2000 was 3 MEUR.

Elcoteq
A subsidiary of Elcoteq Networks Corporation with headquarters located in Finland. Elcoteq manufactures primarily electronic subassemblies such as mobile phone’s electronic parts and accessories, but also rovides engineering and after sales services. As majority of the production is subcontracting work to Ericsson Corporation and Nokia, sales and performance of Elcoteq has been substantially reliant on the large scale subcontracting orders. Moreover, as Elcoteq is by far the most influential actor on Estonian ICT landscape, accounting for 83% of total Estonian ICT exports3, the company has direct impact on the growth rates of the whole ICT sector. Though, such kind of heavy dependency on one exporter is harmful for the entire economy, as it makes ICT export particularly vulnerable to the developments taking place within a single company.

Elcoteq is the leading exporting company in Estonia - in 1998 and 1999 the export from Elcoteq was 350 MEUR, while the year 2000 witnessed almost threefold export growth to approximately 1 billion EUR. However, global slowdown on telecom markets in 2001 has vigorously affected Elcoteq’s business, which has resulted in unused capacities such as conserved new plant in Tallinn and remarkable downsizing in personnel. At the beginning of 2000 Elcoteq employed as much as 3600 persons, while in August 2001 the number of employees has dropped to 2000. According to Estonian Business Registry the turnover of Elcoteq was 25,9 MEUR, which obviously did not incorporate the transactions between the subsidiary and headquarters. Elcoteq is is main supplier, researcher and manufacturer of mobile equipment. Further information available at www.elcoteq.com

Skype Technologies Ltd
Skype Technologies Ltd is a branch company of Skype International. Skype Technologies Ltd is the Global P2P Telephony Company™ that is changing the telecommunications world by offering consumers free, superior-quality calling worldwide. Skype Technologies Ltd is researcher, supplier and manufacturer of these kind of services. Further information is available at www.skype.com

Reach-U Ltd
Reach-U's product portfolio consists of LBS middleware and appr 10 LBS applications, the products are offered to mobile operators around the world. Reach-U LBS middleware and applications are currently commercially running in Etisalat (Saudi Arabia), Orange (Slovakia), Telenor (Norway), Elisa (Finland), EMT (Estonia) and Radiolinja (Finland/Estonia), more implementations are ongoing in Europe and Asia.

Reach-U has roots in location solutions from 1989, starting as spin-off of Tartu University. Reach-U's initial activities included mapping and geographical information systems (GIS), the company started in  LBS solutions area already in 1999, delivering world's first LBS project together with Ericsson. The first solution was Emergency E-112 software for EMT, launched with great success in May 2000.

LBS Middleware product called Reach-U PinPoint Mgine allows operators to launch new services easily and cost-efficiently, keep the maintenance costs of existing services low, and improve the revenue from the LBS services by providing them with a set of enhanced functionality (e.g GIS, improved accuracy).Reach-U Ltd is researcher, supplier and manufacturer of these kind of services. Further information is available at www.reach-u.com

Rantelon Ltd
Rantelon Ltd is a spin-off company of Tallinn University of Technology and develops equipment for Wifi. Rantelon is a researcher and manufacturer. Further information is available from CEO Professor Andres Taklaja, e-mail andrest@lr.ttu.ee

NW Testbeds

The strengths, weaknesses, opportunities and threats
This sector has significant researchers but manufacturing and supplying is not so remarkable. The basic weakness emerges from low industry support and thus it is also the main opportunity to have stronger cooperation.

RTDs and SMEs conducting R&D activities
Tallinn University of Technology
Tallinn University of Technology is the only research institution dealing with telecommunications and NW testbeds. Further information can be received from Mr Avo Ots, e-mail avots@lr.ttu.ee and Mr Jaan Penjam, e-mail jaan@cs.ioc.ee