Telecom analysts and industry insiders predict Telefonica and the world's largest telecommunications company, Vodafone, which acquired the country's third-largest mobile operator, Oskar Mobil, in May, will quickly move to increase their market shares. Many of the remaining alternative providers, such as Contactel, will likely be bought out or merge with other companies, much like GTS Czech and Aliatel did this year, as they struggle to compete.

"It's a tough market, and if you merge two or three operators, you double or triple your sales, and costs stay the same," said Tomáš Gatěk, an analyst at Patria Finance.

The predicted consolidation will likely result in a more competitive market with as few as five telecom providers, including mobile operators. Players will then need to focus on raising the quality of services rather than the current strategy of orchestrating price wars to keep an edge, said Pavel Kaidl, public relations manager at GTS Novera, the company that arose from the merger of GTS and Aliatel.

Providers will nevertheless have to stay competitive on fees, so consumers will come out ahead, with access to stronger products at competitive prices, according to analysts. "Eventually, the consumer should be getting better prices and better services," Gatěk said.

Telefonica will drive much of the product and service innovation, because it remains in the company's interest to grow the market — something that didn't happen during Český Telecom's reign, said Jeff Welker, managing director of BCH TeleCommunications, a telecom advisory firm in Prague.

"Český Telecom has been run by people interested in putting money in their own pockets and not adding any value to shareholders [or] planning any technical growth," Welker said, noting he remains optimistic about Telefonica's arrival onto the market.

It's too early to determine how the industry will develop in the Czech Republic, because companies continue to experiment with which products will sell. "We're looking at what will make Czech customers tick," said Milan Rusnák, CEO of GTS Novera, now the country's largest alternative provider, offering fixed-line and Internet services.

Many analysts, however, said providers will eventually shift attention away from voice services which have suffered from competition. Call revenues declined 5 percent at Eurotel in the first quarter of 2005 compared with 2004, and the effective price per minute for calls decreased around 8 percent last year, according to data from Patria Finance.

The majority of companies will look to compete on broadband Internet service, primarily ADSL connections, likely bundled with other products, including voice. Gatěk said fixed-line and mobile services will one day come free of charge as a part of package deals.

Eurotel has begun testing the viability of selling fixed-line, mobile and Internet products together. The company opened a convergence store at Prague 10's Eden shopping center July 15 where customers can shop for all three services. If the store succeeds, Eurotel plans to open more.

Also on the horizon are innovations that will make fixed-line services dramatically cheaper. Larger companies may look to use GSM signals instead of ground cables to provide fixed-line and wireless Internet services to businesses, which would allow them to dramatically cut costs.