A natter with Netia
Speaking just one day after an announced outline of the schedule and conditions of the tender for third-generation (3G) frequencies, to go on sale this coming October, Wojciech Mądalski, Netia's CEO, exuded the confidence that his company has the potential to lead the consolidation of the fixed-line telecoms market, as well as rising to the monumental challenge of launching a UMTS, as the 3G standard is known, network to take on the country's three established operators, viz. Polska Telefonia Cyfrowa (PTC), Polkomtel and PTK Centertel.
UMTS has long been interpreted by cynics as meaning 'unlimited money to spend.' And this is no wonder given that building the necessary infrastructure alone is estimated to cost €1 billion (zł.4.46 million), in addition to the substantial license fee. Indeed, just three months ago, Witold Graboś, president of the Office for Telecommunications and Post Regulation (URTiP), was talking of downgrading the standard for the next generation of mobile telephony from the costly UMTS to cheaper technologies, often referred to as 2.5G.
At the time, the three established mobile operators, who had paid €650 million (zł.2.9 billion) apiece for their licenses, were asking for the service launch deadlines to be pushed back for a third consecutive time. But the climate has suddenly changed; the established players are now vying with Netia for the vacant frequencies.
"The entry of another player [onto the mobile market] would definitely bring about a lot of downward price pressure," Mądalski says, refuting the claims of the established operators.
But Netia's financial strength falls far short of the amounts necessary to go it alone. Therefore, the company needs to find a strategic partner, most likely from abroad.
And while many analysts doubt the existence of a potential partner with loads of cash willing to risk it on an unproven business proposition in a relatively undeveloped market, Netia's head honcho remains optimistic about the lure of the country's growth potential, pointing to Tele2, a Swedish operator whose local arm has expressed an interest in bidding for UMTS frequencies, as a possible candidate.
"If Tele2 is interested at the global level, then it could be one of the companies among which we would be looking for a partner," Mądalski says. But securing financial backing, married to Netia's domestic market know-how and its relatively strong brand and client base, is only half of the battle.
Regulatory issues have been among the biggest stumbling blocks for the development of independent operators in this country, and when the conditions of the UMTS tender were unveiled last Thursday, the URTiP's Graboś did little to allay fears that things won't be any different this time around.
"To my understanding, President Graboś made it clear it could be within his authority to rule the incumbents out of the tender, but he did not answer the question whether he was actually going to do so," Mądalski asserts, implying that the operator could take action to ensure that the introduction of 3G technology would also increase the number of players on the market. Otherwise, market watchers say, the incumbent phone companies would likely outbid challengers such as Netia.
But Mądalski is keen to stress that the regulator's failure to rein in TP SA for its anti-competitive behavior is more due to a lack of appropriate instruments rather than of will. He points to the fines levied by the URTiP over the last three years that are still awaiting execution and that serve to strengthen his hope that this time the regulator will take a proactive approach to ensuring increased competition on the market.
Entering the mobile market would be a big leap for a fixed-line operator that currently controls less than a five percent chunk of the market, but Mądalski says the move makes sense, as it would allow the company to offer convergent services, bringing together fixed-line and mobile phone services, as well as broadband Internet access and data transmission services.
And Netia's CEO is adamant that the fixed-line market, written off by many as an industry in decline, still has a lot of growth potential, throwing his weight behind his conviction by offering zł.1 billion cash for Telefonia Dialog, the firm's biggest rival.
"I would like to reiterate that Netia's bid is one that makes the most sense in business terms," he says. "Other bidders are financial investors and we can match them on price. But our offer also includes the benefits of many synergies between our respective operations, which are complementary. Unless other - that is, non-business - considerations are taken into account, I have no doubt that we are the top bidder." For the head of a company that controls some five percent of a market that is in decline, Mądalski certainly has a lot of spunk.
UMTS has long been interpreted by cynics as meaning 'unlimited money to spend.' And this is no wonder given that building the necessary infrastructure alone is estimated to cost €1 billion (zł.4.46 million), in addition to the substantial license fee. Indeed, just three months ago, Witold Graboś, president of the Office for Telecommunications and Post Regulation (URTiP), was talking of downgrading the standard for the next generation of mobile telephony from the costly UMTS to cheaper technologies, often referred to as 2.5G.
At the time, the three established mobile operators, who had paid €650 million (zł.2.9 billion) apiece for their licenses, were asking for the service launch deadlines to be pushed back for a third consecutive time. But the climate has suddenly changed; the established players are now vying with Netia for the vacant frequencies.
"The entry of another player [onto the mobile market] would definitely bring about a lot of downward price pressure," Mądalski says, refuting the claims of the established operators.
But Netia's financial strength falls far short of the amounts necessary to go it alone. Therefore, the company needs to find a strategic partner, most likely from abroad.
And while many analysts doubt the existence of a potential partner with loads of cash willing to risk it on an unproven business proposition in a relatively undeveloped market, Netia's head honcho remains optimistic about the lure of the country's growth potential, pointing to Tele2, a Swedish operator whose local arm has expressed an interest in bidding for UMTS frequencies, as a possible candidate.
"If Tele2 is interested at the global level, then it could be one of the companies among which we would be looking for a partner," Mądalski says. But securing financial backing, married to Netia's domestic market know-how and its relatively strong brand and client base, is only half of the battle.
Regulatory issues have been among the biggest stumbling blocks for the development of independent operators in this country, and when the conditions of the UMTS tender were unveiled last Thursday, the URTiP's Graboś did little to allay fears that things won't be any different this time around.
"To my understanding, President Graboś made it clear it could be within his authority to rule the incumbents out of the tender, but he did not answer the question whether he was actually going to do so," Mądalski asserts, implying that the operator could take action to ensure that the introduction of 3G technology would also increase the number of players on the market. Otherwise, market watchers say, the incumbent phone companies would likely outbid challengers such as Netia.
But Mądalski is keen to stress that the regulator's failure to rein in TP SA for its anti-competitive behavior is more due to a lack of appropriate instruments rather than of will. He points to the fines levied by the URTiP over the last three years that are still awaiting execution and that serve to strengthen his hope that this time the regulator will take a proactive approach to ensuring increased competition on the market.
Entering the mobile market would be a big leap for a fixed-line operator that currently controls less than a five percent chunk of the market, but Mądalski says the move makes sense, as it would allow the company to offer convergent services, bringing together fixed-line and mobile phone services, as well as broadband Internet access and data transmission services.
And Netia's CEO is adamant that the fixed-line market, written off by many as an industry in decline, still has a lot of growth potential, throwing his weight behind his conviction by offering zł.1 billion cash for Telefonia Dialog, the firm's biggest rival.
"I would like to reiterate that Netia's bid is one that makes the most sense in business terms," he says. "Other bidders are financial investors and we can match them on price. But our offer also includes the benefits of many synergies between our respective operations, which are complementary. Unless other - that is, non-business - considerations are taken into account, I have no doubt that we are the top bidder." For the head of a company that controls some five percent of a market that is in decline, Mądalski certainly has a lot of spunk.
