Crowley plans independent telecom services expansion

Wireless Internet access and data transmission operator Crowley Data Poland (CDP) will not join the new national telecom company designed to compete with Poland's dominant domestic and long-distance provider, George D. Crowley Jr., chairman and chief executive officer of Crowley Technologies, told the WBJ last week. Polish Power Grid (PSE), the majority owner of telecom Tel-Energo and partial owner of domestic-long distance carrier Niezależny Operator Miźdzystrefowy (NOM), is leading discussions to create the National Telecommunications Group (KGT) as an antidote to Telekomunikacja Polska's (TPSA) market domination. The new company would consolidate the government's telecom holdings as well as possibly incorporate other independent operators. Independent companies, such as alternative telecom Netia, are mulling the possibility of joining. Tel-Energo, the key player in the consolidation plan, is in the process of merging with NOM as well as conducting talks with other state-owned telecoms and will present a detailed plan for KGT's creation to government officials by mid-year. "It's an interesting concept … but these types of mergers are difficult in the most favorable environments," said Crowley, whose Maryland-based company owns CDP and operates cellular networks in the United States. "When I take a look at that (project), where you have very complex political and private ownership structures and entities that would require significant incremental capital plus brand new technology, they have a formidable task ahead of them."

Many, if not all, the telecoms that could join the group are struggling with heavy debt. Market watchers say that KGT's hub company would have to finance the smaller indebted operators, thereby depleting its own financial resources. According to a recent report, Tel-Energo had a zł. 10 million ($2.5 million) loss last year on revenue of zł. 237 million ($59 million). "Our experience in the United States has been that large mergers in the telecom business - even when all the component companies were profitable - are extraordinarily difficult to make successful," Crowley said. "Here you have a series of potential components that are having financial problems of their own on an individual basis, so that exacerbates the problem." Earlier this month, Tel-Energo acquired a minority stake of wireless Internet service provider Pro Futuro, Crowley's main competitor, when it purchased zł. 64 million ($16 million) worth of the firm's convertible bonds. Tel-Energo, whose 11,000-kilometer fiber-optic network is the second largest in Poland after TPSA's, would likely incorporate its Pro Futuro holding into the new national company. Operators of wireless broadband networks that provide high-speed Internet access and data transmission via radio waves have also struggled for survival on the Polish telecom market since few corporate clients are willing to pay for their pricey services. Besides CDP and Pro Futuro, Tele2 Polska also offers wireless Internet access as well as voice over Internet protocol (VoIP) service - voice transmission via digital packets rather than traditional telephone networks. Another wireless operator, Formus Polska, went bankrupt earlier this year after steadily losing clients. Crowley refused to comment on CDP's financial performance or revenue expectations but said that he expected a full return on the Polish investment within five to seven years. CDP, a privately owned firm that started offering service in Poland in September 2000, recently dropped the brand name DataStar in favor of the more recognizable Crowley name. Earlier this month the firm increased its equity from zł. 38 million ($9.5 million) to zł. 59 million ($15 million) to finance the further development of its network. The injection was part of CDP's plans to increase its investment in Poland by a total $100 million. So far, CDP operates in six major metropolitan areas, including Warsaw, Kraków, Poznań, the Tri-City area (Gdańsk, Gdynia and Sopot), Wrocław and Katowice. The firm plans to start offering VoIP service this month. CDP, which employs about 125 workers, has about 1,000 corporate clients - a mix of government institutions and Polish and international companies in all sectors as well as every major telecom firm. CDP adds more than 100 new clients a month to its customer roster, according to Crowley.