Cellular skirmishes
However, with a spate of new players preparing to flood the market, providers will also have to find new sources of income to fend off the competition.
The recent announcement that Polska Telefonia Cyfrowa (PTC) will rebrand its Era service into T-Mobile next year promises to spice up the already competitive Polish mobile telephony market. New market leader Centertel won't give up its throne without a fight and Polkomtel's rapid client growth this year has whetted the company's appetite. With a line of new operators ready to enter the market and competition bound to get tougher, the mobile-service providers have to look for new sources of income to give them a competitive advantage.
After the recent resolution of a lengthy and caustic custody battle, mobile operator PTC is preparing to rebrand its Era service in the image of its new majority-stake holder, German powerhouse T-Mobile. "It is possible in the second quarter of 2007," announced PTC's new president, Klaus Hartmann. He said that market research and a decision by shareholders would have to precede the rebranding, which Hartmann foresees as a success, pointing to market rival Centertel's positive experience.
It is expected that the rebranding will concern PTC's Era brand only - Hartmann suggested that the Heyah and Tak Tak pre-paid brands would retain their names. Hartmann also announced that PTC will spend up to zł.1 billion in 2007, part of which will be earmarked for rebranding, with the bulk going to support the development of UMTS (3G) technology and of its sales network.
The company needs growth, as the past year has not been particularly successful. Having been the market leader as recently as 2005, it was subsequently dethroned by Centertel, operator of the Orange brand. According to Centertel's estimates, in mid-2006 it had 34.3 percent of the market, followed by PTC with 33.6 percent and Polkomtel - operator of the Plus and Sami Swoi brands - was in third place with 32.1 percent.
Analysts and experts think that rebranding could well benefit PTC. "Rebranding is always accompanied by increased marketing and advertising campaigns. This could help boost the company's growth," explains Michał Buczyński, a telecoms analyst at Millennium DM brokerage house.
He points out that PTC's market loss was the result of a shareholder feud between Deutsche Telekom and French Vivendi, which were battling over a 48-percent stake in the company, as well as Centertel's marketing offensive following its September 2005 rebranding. "Now, with the rebranding, PTC is sending a signal that all is well in the company, that it has a clear ownership structure, and that a clear strategy can therefore be worked out," independent telecom analyst Tomasz Kulisiewicz explains.
A two-front war
PTC shouldn't be concerned solely with Centertel. Third-place Polkomtel has ambitious plans under its president, Jarosław Bauc - a former Minister of Finance.
"We want to have about 33 percent of the market at the end of this year, which means we will be bigger than Era," Bauc declared in October. The operator's client growth gives the president good reason to be optimistic. At the end of September, Polkomtel's mobile brands had 11.1 million customers. "Our target is to have 12 million subscribers at the end of December," Bauc claims.
But when Era becomes T-Mobile, Polkomtel will remain the only Polish brand on the mobile telephony market without the support of a global brand. "This shouldn't be a problem," Kulisiewicz claims. He recalls an example from the Hungarian market, where Pannon GSM kept its brand name after being bought out by Norwegian Telenord and even ran advertising campaigns underlining its Hungarian background. However, he thinks that if PTC's rebranding goes smoothly, Era's operator should start to regain lost ground and will give Orange reasons to worry. The Millennium DM expert agrees. "Polkomtel will be the only one without a strong owner - it will be Centertel and PTC fighting for the top spot," Buczyński predicts.
Polkomtel's ownership structure is quite diffuse, with Vodafone Americas, PKN Orlen, KGHM and Danish firm TDC each owning a 19.61-percent stake, the Polish Electric Grid possessing 17.56 percent, and Węglokoks with four percent. Recently Vodafone announced that it is considering increasing its shares in Polkomtel. TDC's shares are up for grabs, but the other shareholders haven't managed to agree on a price and the case is stuck in an arbitration court in Vienna.
New blood
While next year will see an intensification of the battle between the three operators, the market is still waiting for the entrance of a fourth player onto the market.
P4 (formerly Netia Mobile) won the GSM 1800 tender back in 2005, but still hasn't launched its services. Furthermore, the decision to start operations has been once again postponed until 2007. "[This decision] was disappointing, but inevitable due to serious delays in obtaining the environmental permits to build the network," explained Paweł Karłowski, the acting president of Netia, whose firm has a 30-percent stake in P4.
The operator-to-be has so far only been granted 36 out of the 1,500 permits it wants to set up its transmission infrastructure. The company has recently been granted a EUR 150 (zł.573.3) million loan by China Development Bank to buy elements of a UMTS network, to acquire locations for the transmission towers, and to finance their construction.
Kulisiewicz explains that P4 has been "trapped in typical red-tape absurdity." He claims that a new law which requires investors to present a study of their investment's impact on the environment is much more severe than required by EU regulations and allows an investment to be protested against at every stage. "Even changing an antenna on an existing tower requires documentation as if one was building a ring road," Kulisiewicz claims. The requirements for erecting a new tower are even stricter.
Virtual competition
Next year will also see the entrance of Mobile Virtual Network Operators (MVNO) onto the market. The firm MNI Mobile has signed a letter of intent with Centertel to use the latter's infrastructure. Cyfrowy Polsat, which has a similar agreement with PTC, announced last week that its planned mobile-market debut has been postponed from the end of this year to mid-2007. The company wants to target Cyfrowy Polsat's satellite TV subscribers and plans to offer special discounts for those buying mobile and TV services together. "An ambitious challenge would be getting one million subscribers in the first two years after launching," the company's president, Dominik Libicki, announced.
Virtual operators are something common in Europe - there are over 150 MVNO's on the continent. As Kulisiewicz points out, some have millions of subscribers. Virgin Mobile, for example, has over 7.5 million clients. Even British Telecom offers mobile services as a virtual operator, based on an agreement with Vodafone. Many renowned brands, such as Carrefour, Tesco or Tele2, have mobile operations in addition to their primary business. "Having a brand, capital and a client base helps," Buczyński said. He added that one doesn't need huge number of subscribers to be successful and to make profits. "One has to find a niche," he said. "In Western Europe ethnic minorities have their operators. Even a football club in Belgium, Charleroi, has a mobile telephony offer for its fans," Kulisiewicz explains.
Quadruple-players
With mobile penetration in Poland reaching 90 percent, operators' revenues are bound to grow at a much slower pace than currently. The experts even claim that the growth dynamics could be negative, and revenue from voice services, in particular is expected to fall in the coming years.
"Internet, multimedia and images are the future. They can prevent the stagnation in revenues," Buczyński claims. Added services, such as mobile television, data transmission, mobile internet, wireless internet cards for notebooks as well as premium-rate SMS will provide a significant part of operators' revenue in the near future. In the long run, Kulisiewicz expects convergent services to be the future of today's mobile operators. "That means fixed-line telephony, mobile telephony, internet and TV all in one," he explains.
