Centertel roused from GSM dreams

The verdict: Centertel, which operates a first-generation Nordic Mobile Telecommunications (NMT) 450 system, will not be one of the competitors for a concession to build and operate a second-generation Global Systems Mobile (GSM) telephone system.
"The board has discussed the matter of striving for a GSM license and determined there is a lack of interest," said Centertel Supervisory Board Chairman Marek Konarski, who doubles as advisor to TPSA Board Chairman Jacek Gadomski. "These efforts (to obtain a license) are to no avail, because the majority shareholder is not interested." The shareholders in PTK Centertel SA are Telekomunikacja Polska SA (51%), Ameritech (24.5%) and France Telecom (24.5%).
While the rainbow over Ameritech and perhaps France Telecom's GSM pot of gold may have vanished, Ameritech sees hope in the countryside for development of its existing network.
TPSA Vice Chairman Witold Harasim listed three reasons TPSA would not go after the GSM license: the cost involved in developing the network, the global trend toward demonopolization of telecommunications and their "misfortune in Centertel." TPSA has complained that it has no say on key issues in Centertel, with top positions filled by Ameritech and France Telecom candidates. "We have met with our partners on several occasions to discuss consolidating TPSA's position in Centertel," Harasim said. "We don't want to be a marionette."
The decision marks a bitter ending to a tale of promises made and broken and, for some, calls into question the credibility of the Polish government's word to foreign investors.
The shareholders' meeting was called by Ameritech. The purpose was a last-ditch effort to go after a concession for the GSM license on the basis of promises made in 1991 when Centertel was founded.
Those promises were embodied in a letter of intent signed by then Communications Minister Jerzy Slezak which said Centertel would be granted a GSM license as soon as the 900 Mhz frequency required to operate the network became available. At that time the frequency was used by the Polish military.
In April Centertel formally applied for a GSM license. The Communications Ministry responded that if Centertel wants to operate a GSM system, they'll have to go through a competitive tender and pay an estimated $250 million or more for the concession. The cost of building the entire system is estimated at $1.5 billion.
The apparent turnaround was caused by amendments to the Law on Telecommunications that went into effect on July 7 and requires that all licenses be issued through a competitive tender. "The letter of intent was signed under different conditions but is no longer valid, because the law has changed," Slezak said. "But if it were possible, I would sign another letter of intent today." Slezak is currently chairman of TPSA's supervisory board.
But even if Centertel were to bid for a GSM license, its chances of receiving one are slim. Regulations contained in the tender documentation were worded in such a way as to prevent de facto Centertel as a whole, and TPSA in particular, from obtaining a license because of concerns about monopolistic practices.
A non-competition clause in the original shareholders' agreement would prevent minority shareholders from going after a license without TPSA, thus shattering Ameritech or France Telecom hopes for a GSM license.
The contract could, of course, be re-negotiated to allow the partners to bid without TPSA, but at least Ameritech has stated that it will not bid for any license without the other two shareholders. That decision was made at the corporate level. France Telecom was unavailable for comment on its plans.
So, what does it all mean? The foreign partners have been roused from their GSM dreams, realizing they still have the NMT 450 mobile telephone system, which however outdated, can still find its niche in Poland's mobile market.
Ameritech, for its part, has declared its devotion to what a company executive described as a marriage with TPSA in the bonds of Centertel. As with all marriages, the honeymoon has to end, and when that happens, it comes down to a commitment to working through problems.
With GSM out of reach, they're planning to focus on improving the existing network and polishing Centertel's public image, tarnished by recent wranglings and complaints of poor service.
Ameritech, which operates NMT 450 systems in other countries, knows the limitations and advantages of the network. One advantage for Centertel's system is its coverage, expected to reach 90% of the countryside by the end of the year. GSM operators will start up first in large cities, draining away many of Centertel's current city subscribers.
But that's not necessarily bad news. Many of the complaints leveled recently against Centertel concern service in Warsaw, where the NMT system is overloaded. By taking off a significant portion of the load in the cities, service will improve for those that stick with Centertel.
The company appears to have done well so far. Although Centertel executives have declined to release full financial data, some figures are available. For 1994, Centertel showed a net profit of $24 million, and for 1995, TPSA is expecting to receive dividends from Centertel totaling zl. 22.7 million ($9.2 million).
Ameritech officials, while disappointed, are trying to put the situation in context. "Of course this (NMT) is a much smaller business than GSM, but we're being optimistic - we have to find a way to deal with it," said one Ameritech executive. "Ameritech's corporate policy is to invest $3 billion annually. If we are not available for GSM here, we will use these capital resources for other opportunities around the world."