Change is in the air(waves)
The past weeks have witnessed a further skirmish in the war of attrition as the battle between the major GSM networks continues to intensify.
Centertel, operator of Idea, launched the latest salvo-a two pronged attack with 'One Idea' integrating old tariffs into a more simple post-paid system and the unveiling of its heavily advertised 'World of Idea' mobile portal.
Polkomtel's Plus GSM retaliated with a significant drop in post-paid rates, while PTC's Era subsequently raised the stakes with the launch of its 'One' tariff. Era, the largest operator in terms of clients, laid down a recruitment challenge, claiming it will be able to count on 9 million users by the end of December-and promised a series of post-Christmas "new offers."
In any sector based on advanced technologies, "new offers" mean just one thing: price cuts.
Telecom unlimited
It seems competition has now narrowed to a fight for customers using post-paid rates. From March to September, the price war in the ever-popular pre-paid card market was responsible for a 50 percent drop in charges. Analysts agree, it's high time for the post-paid systems to follow suit.
Together, the three operators have 21 million users between them, which means 55 percent of the population now carries a mobile. Despite that, they believe there is still plenty of room for expansion. Spokesperson with Idea, Jacek Kalinowski, predicts some two to three years of stable growth in GSM, and reveals his company's short-term goal.
"With our new campaigns we intend to acquire several hundred thousand new clients in the next months," says Kalinowski.
Plus GSM's spokesperson, Elżbieta Sadowska Pta-szyńska, beams with even more optimism. In her opinion, reaching a borderline of 100 percent market penetration does not mean a red light for traditional mobile phones.
"In Finland, for example, there are more active SIM cards than people living there," she points out. Many Finns use two or more cell phones, one for business and one for private use. Advanced home alarm systems use mobile phone technology, and thus SIM cards as well.
Cautious steps
However, those who would like to find a free cell phone at the bottom of each box of cookies, as happened once in Scandinavia, shouldn't hold their breath. The operators are aware a drastic price war could swallow them up in an instant. That's why the pre-paid card scenario is unlikely to be repeated in the post-paid system.
"The prices are already quite low. No one should count on large reductions," says equity analyst from Deustche Securities, Krzysztof Kaczmarczyk. Ironically, with differences in purchasing power parity taken into account, the average price per minute remains quite high in Poland compared to Western Europe, at least when it comes to post-paid rates. The revenues however, must compensate for the massive investments in telecom and IT infrastructure made by all three operators. Public broadcasting frequencies cost an arm and a leg, and moreover, operators must contend with the €650 million for each UMTS concession. One analyst labelled this "an enormous tax". Those expenses must be covered.
Nevertheless, as independent telecom analyst Tomasz Kulisiewicz sates: "Prices will fall 20 percent during the next 12 months." But even he says operators only ever take tentative steps: When one company reduces fares by 10 percent, then others hastily follow suit, never leaping ahead of their rivals.
In this tense market there are serious concerns about rocking the boat. Kulisiewicz warns about the importance of learning from the lessons of the Czech Republic, suggesting a similar catastrophe could occur in Poland. The launch of a new telecom, Oskar, across the border several years ago resulted in price reduction madness, which caused a virtual collapse of the market. It is only recently that Czech operators have recovered financially.
Analysts say with no room for spectacular moves in price cuts, Idea, Era and Plus GSM need to focus on marketing. "In pre-paid, we can expect new SMS and minutes packets," predicts Kaczmarczyk, "and new offers for calls within one operator network in all systems."
However, this picture of a stabilized market may change dramatically.
When the Office of Telecommunications and Post Regulation announced its plans in mid-September to allow new entities into the market by the end of the year, the GSM world responded with agitation and concern.
Any room left?
Authorities claim new faces would promote healthy competition, The plans mean up to three new players could join the game, two in GSM and one in UMTS-the next generation of mobile technology. In all, that means there could be as many as six so-called 'telcos' to divide the pie. Office of Tele-communications spokesperson Jacek Strzałkowski says that a bid's most important criteria would be the amount each candidate is willing to offer for frequency reservation.
However, this matter of money could jeopardize the entire process. "No reasonable person would pay millions for the frequency now," says Kulisiewicz.
Deutsche Bank's Kaczmarczyk supports this view, adding: "If the license is expensive, there will be no fourth operator-not with market penetration already at 55 percent." Starting in the telcom industry from scratch is a Herculean effort in itself, so newcomers could not afford to build infrastructure, on which the 'big three' have already spent some several billion złoty.
A possible solution could be a virtual operator, which would be independent financially and would lease IT systems and air-waves from established companies. According to Kaczmarczyk, Netia SA, a private land-line operator, has chosen this exact strategy.
Undoubtedly, a fresh-starter would turn the sector on its head. That's what telcos fear the most-competition out of control. And they are dedicated to safeguarding their territory.
"We are not against competition, but any new operator should enter on the same conditions as others did," says Elżbieta Sadowska-Ptaszyńska of Plus GSM.
"Since the beginning, GSM and UMTS concessions law has changed several times," responds Strzałkowski, dismissing the operator's claim as out of date. In the end, the old scenario including enormous €650 million payments for UMTS appears unrealistic due to legal and economic reasons.
Logo repaint
With just three years of GSM expansion to go, telcos face the question of what is next. The high tech sector changes constantly, but one choice prevails-UMTS. The system, after initial failure and low demand for its services, is recovering slowly in Japan and Western Europe. In Poland, Plus has already introduced the service and Era plans to early next year. Analysts warn however, that UMTS expansion in the country is heavily saddled by the concession payments.
"It [UMTS] looks better where operators got permissions for a symbolic 1 euro," claims Tomasz Kulisiewicz. As yet, no one is certain what purposes UMTS will serve, and in particular what services clients are willing to pay for.
But the future of Poland's GSM market is determined to a large extent by its foreign shareholders. Much of Idea is owned by Orange, the mobile branch of France Telecom, while Plus GSM's strategic investor is Britain's Vodafone and Era's big brother is the German T-Mobile.
"When the first one rebrands, others will repaint their logos in a week's time," Kulisiewicz adds. To do that only Vodafone would have to enlarge its financial commitment in Plus GSM. Apparently, there is no 'if,' just 'when.'
Centertel, operator of Idea, launched the latest salvo-a two pronged attack with 'One Idea' integrating old tariffs into a more simple post-paid system and the unveiling of its heavily advertised 'World of Idea' mobile portal.
Polkomtel's Plus GSM retaliated with a significant drop in post-paid rates, while PTC's Era subsequently raised the stakes with the launch of its 'One' tariff. Era, the largest operator in terms of clients, laid down a recruitment challenge, claiming it will be able to count on 9 million users by the end of December-and promised a series of post-Christmas "new offers."
In any sector based on advanced technologies, "new offers" mean just one thing: price cuts.
Telecom unlimited
It seems competition has now narrowed to a fight for customers using post-paid rates. From March to September, the price war in the ever-popular pre-paid card market was responsible for a 50 percent drop in charges. Analysts agree, it's high time for the post-paid systems to follow suit.
Together, the three operators have 21 million users between them, which means 55 percent of the population now carries a mobile. Despite that, they believe there is still plenty of room for expansion. Spokesperson with Idea, Jacek Kalinowski, predicts some two to three years of stable growth in GSM, and reveals his company's short-term goal.
"With our new campaigns we intend to acquire several hundred thousand new clients in the next months," says Kalinowski.
Plus GSM's spokesperson, Elżbieta Sadowska Pta-szyńska, beams with even more optimism. In her opinion, reaching a borderline of 100 percent market penetration does not mean a red light for traditional mobile phones.
"In Finland, for example, there are more active SIM cards than people living there," she points out. Many Finns use two or more cell phones, one for business and one for private use. Advanced home alarm systems use mobile phone technology, and thus SIM cards as well.
Cautious steps
However, those who would like to find a free cell phone at the bottom of each box of cookies, as happened once in Scandinavia, shouldn't hold their breath. The operators are aware a drastic price war could swallow them up in an instant. That's why the pre-paid card scenario is unlikely to be repeated in the post-paid system.
"The prices are already quite low. No one should count on large reductions," says equity analyst from Deustche Securities, Krzysztof Kaczmarczyk. Ironically, with differences in purchasing power parity taken into account, the average price per minute remains quite high in Poland compared to Western Europe, at least when it comes to post-paid rates. The revenues however, must compensate for the massive investments in telecom and IT infrastructure made by all three operators. Public broadcasting frequencies cost an arm and a leg, and moreover, operators must contend with the €650 million for each UMTS concession. One analyst labelled this "an enormous tax". Those expenses must be covered.
Nevertheless, as independent telecom analyst Tomasz Kulisiewicz sates: "Prices will fall 20 percent during the next 12 months." But even he says operators only ever take tentative steps: When one company reduces fares by 10 percent, then others hastily follow suit, never leaping ahead of their rivals.
In this tense market there are serious concerns about rocking the boat. Kulisiewicz warns about the importance of learning from the lessons of the Czech Republic, suggesting a similar catastrophe could occur in Poland. The launch of a new telecom, Oskar, across the border several years ago resulted in price reduction madness, which caused a virtual collapse of the market. It is only recently that Czech operators have recovered financially.
Analysts say with no room for spectacular moves in price cuts, Idea, Era and Plus GSM need to focus on marketing. "In pre-paid, we can expect new SMS and minutes packets," predicts Kaczmarczyk, "and new offers for calls within one operator network in all systems."
However, this picture of a stabilized market may change dramatically.
When the Office of Telecommunications and Post Regulation announced its plans in mid-September to allow new entities into the market by the end of the year, the GSM world responded with agitation and concern.
Any room left?
Authorities claim new faces would promote healthy competition, The plans mean up to three new players could join the game, two in GSM and one in UMTS-the next generation of mobile technology. In all, that means there could be as many as six so-called 'telcos' to divide the pie. Office of Tele-communications spokesperson Jacek Strzałkowski says that a bid's most important criteria would be the amount each candidate is willing to offer for frequency reservation.
However, this matter of money could jeopardize the entire process. "No reasonable person would pay millions for the frequency now," says Kulisiewicz.
Deutsche Bank's Kaczmarczyk supports this view, adding: "If the license is expensive, there will be no fourth operator-not with market penetration already at 55 percent." Starting in the telcom industry from scratch is a Herculean effort in itself, so newcomers could not afford to build infrastructure, on which the 'big three' have already spent some several billion złoty.
A possible solution could be a virtual operator, which would be independent financially and would lease IT systems and air-waves from established companies. According to Kaczmarczyk, Netia SA, a private land-line operator, has chosen this exact strategy.
Undoubtedly, a fresh-starter would turn the sector on its head. That's what telcos fear the most-competition out of control. And they are dedicated to safeguarding their territory.
"We are not against competition, but any new operator should enter on the same conditions as others did," says Elżbieta Sadowska-Ptaszyńska of Plus GSM.
"Since the beginning, GSM and UMTS concessions law has changed several times," responds Strzałkowski, dismissing the operator's claim as out of date. In the end, the old scenario including enormous €650 million payments for UMTS appears unrealistic due to legal and economic reasons.
Logo repaint
With just three years of GSM expansion to go, telcos face the question of what is next. The high tech sector changes constantly, but one choice prevails-UMTS. The system, after initial failure and low demand for its services, is recovering slowly in Japan and Western Europe. In Poland, Plus has already introduced the service and Era plans to early next year. Analysts warn however, that UMTS expansion in the country is heavily saddled by the concession payments.
"It [UMTS] looks better where operators got permissions for a symbolic 1 euro," claims Tomasz Kulisiewicz. As yet, no one is certain what purposes UMTS will serve, and in particular what services clients are willing to pay for.
But the future of Poland's GSM market is determined to a large extent by its foreign shareholders. Much of Idea is owned by Orange, the mobile branch of France Telecom, while Plus GSM's strategic investor is Britain's Vodafone and Era's big brother is the German T-Mobile.
"When the first one rebrands, others will repaint their logos in a week's time," Kulisiewicz adds. To do that only Vodafone would have to enlarge its financial commitment in Plus GSM. Apparently, there is no 'if,' just 'when.'
