Centertel's GSM 900 service to spark ad, not price, war
Cellular phone operator Centertel's introduction of a dual-operating mobile frequency this week will not ignite price wars with its competitors, but rather spark heavy ad campaigns to keep existing customers and snag new ones, industry analysts said last week.
"The advertising campaign(s) will take a lot of money to draw (new) customers and retain old customers with the introduction of a new player," said Rafal Gebicki, an analyst at Raiffeisen Capital & Investment Polska.
Cellular phone operator PTK Centertel will start operating at Poland's standard frequency of GSM 900/1800 as of March 1, expanding its network across most of the country. The company bumped up to the GSM 900 frequency from its previous analog system after receiving permission from the Communications Ministry.
"This is not a revolution in terms of new technology, (but) allows for more customers to connect ... and a bit higher quality signal," said Zbigniew Lapinski, a telecom analyst at Deutsche Bank Research.
With only about 880,000 current subscribers accessible in only 10% of the country, Centertel lags behind its two national competitors Polska Telefonia Cyfrowa (Era GSM), the mobile market leader, and No. 2 Polkomtel (Plus GSM). Lapinski estimated that both Era and Plus have 1.8 million-2 million current subscribers each, although neither company has released official figures.
A joint venture owned by Poland's Telekomunikacja Polska (TPSA) and France Telecom, Centertel has ambitious plans to use the new frequency to expand its Idea service to cover 79% of Poland. By the end of the year, the company wants to cover 90% of the country with the service. Centertel's Idea network currently is available in only 10% of Poland. The company also plans to sign on an additional 1 million subscribers this year by offering rates 20% less than those charged by other mobile operators.
In a market where corporate clients and individuals with high disposable income are the most profitable customer bases, Centertel's lower rates could attract a new group of users who previously were unwilling to pay for a national mobile phone service.
"It could target lower-end users those who don't care about full national coverage (but about) price students and taxi drivers," Lapinski said.
But to be competitive, Centertel also will have to offer quality and service that's on par with other mobile operators, as well as introduce new services such as discount calling minutes, weather forecasts and stock quotes, analysts said.
In the mobile phone business, where discounts and different promotional packages for customers are available at a range of prices, Centertel's beefed-up frequency will not force its competitors to offer lower prices, analysts said. Instead, the rival operators will engage in an ad war that will especially heat up at the end of the year.
"Price wars don't make sense," Lapinski said. "The Polish market is growing rapidly, and the fight will be for corporate clients. They're not a big group, but they are attractive." He predicted that 2.5 million-3 million new customers will sign up for mobile phone service in Poland this year.
The mobile ad campaigns are expected to be intense at year-end. "You must remember that just before Christmas is the (busiest time for) ad campaigns in the mobile business," Gebicki said. "(Mobile) phones are a popular Christmas gift."
