Calling a spade a spade

Telbank has 14 banks as shareholders and continues to offer services mainly to banks.
By : Roseanne Gerin

    Pioneer: Andrzej Cichy, Telbank president.

   Andrzej Cichy sees himself as a latter-day spade salesman, the type that struck it rich during the California Gold Rush of the 19th century. By supplying the players instead of doing the digging himself, his firm, Bankowe Przedsiębiorstwo Telekomunikacyjne Telbank (http://www.telbank.pl), has carved itself a niche segment in the telecom industry – providing specialized data transmission services to banks. The strategy also made Telbank immune to the effects of the slumps in the IT and telecom sectors.

   “We move around in lower spheres – in (data) transport,” said the 57-year-old president of Telbank, explaining that the IT downturn has hit mainly Internet firms. “One of the banks said the firm was lucky because (as) during the Gold Rush in (California), the ones who made the most money were the ones who sold the spades. No matter whether one found gold or not, (men) had to dig in the ground. We know what our role is and we respect that. We know the spade is supposed to be good.”

   But Telbank may soon have its niche carved away by competitors. From 2001-2003, Telbank has embarked on a strategy to expand its services by building a 2,500-kilometer national fiber-optic loop for about zł. 400 million ($95 million).

   “We’re not building it for our customers, but we want to move the leased connection into our own network,” Cichy said, adding that his firm decided to go ahead with the project after other operators, such as Telekomunikacja Polska (TPSA), Tel-Energo and Polish State Railways (PKP), created fiber-optic telecom networks.

   Shareholder disagreement, however, scuppered Telbank’s plans in June to double its share capital from zł. 130 million ($30.9 million) through a new share issue to finance the project. Paweł Byra, the office director of Telbank’s board, said the firm would consider other options, including loans, the company’s own means and another possible share issue.

   The National Bank of Poland (NBP) and the Association of Polish Banks created Telbank in 1992 following the division of the central bank into nine commercial banks. Since the new institutions lacked an integrated data transmission system, Telbank was to fill the void by offering secure and reliable service through terrestrial and satellite transmissions to integrate the banks’ operations.

   At present, Telbank has 14 banks as shareholders and continues to offer services mainly to banks. The firm employs 350 workers in 17 branch offices throughout Poland, and controls about 30% of the country’s data transmission market, Byra said. A privately held company whose major shareholder is the NBP with a 68.7% stake, Telbank had sales revenue of almost zł. 108 million ($25.7 million) in 2000 compared to zł. 102.5 million ($24.4 million) in 1999. The firm’s net profit after taxes was zł. 8.6 million ($2 million), down from zł. 12.3 million ($2.9 million) in 1999.

   With other telecom players eyeing the field for prospective merger partners to lower the costs of building their own national fiber-optic networks, Telbank may become a target. Szeptel (http://www.szeptel.pl), a Szepietowo-based telecom firm that is putting together its own fiber-optic backbone, recently purchased a 20.94% stake in Telbank from Bank Pekao, according to Piotr Kapla, a telecom analyst at COK Bank Handlowy, which owns 1.5% of Telbank and is a Szeptel shareholder. Kapla said he confirmed the sale with Szeptel’s president Michał Skolimowski last week.

   Skolimowski, however, did not return phone calls from the Business Journal. When questioned about the sale, Andrzej Bińkowski, Szeptel’s director of business development, was equivocal, saying at first that the information was “not right,” then that he was not allowed to give information, and finally that he simply didn’t know since he was involved in the transaction.

   “Szeptel would like to have a joint venture with Telbank or to buy shares because to start building a fiber-optic bone is very difficult and they’d need a lot of money,” Kapla said. “The better way is to make a joint venture with an operator which has a bone.” Since some banks, such as COK Bank Handlowy and BRE Bank, own stakes in both Telbank and Szeptel, Kapla said the dual shareholders might be interested in merging the two companies.

   Telbank, however, denied the deal. “In order to become a shareholder one needs to be entered into the company’s share book,” Byra said. “We do not have such an entry from Szeptel. Therefore the claim is not true.”

   Yet, Cichy conceded that Szeptel was interested in acquiring part of Telbank. “If they will have enough money, they will buy us,” he said, adding that every quarter different companies usually make offers to purchase a significant stake of Telbank.

   Still, with the number of firms offering or planning to offer nationwide data transmission service, Telbank remains undaunted. “The company has been in existence for nine years … (and) we have operating profits,” said Cichy. “We know how to adjust to the market. The other companies...first have capital, then the idea, an advertising campaign, then network installation and then they file for bankruptcy.”