Early telecoms struggle with TPSA position
But some realized the high potential in Polish telecommunications from the beginning of the market's grand opening. From that vision, they have built up the country's largest private domestic telephone company.
R.P. Telekom S.A. - No. 3 on this week's list - was founded in 1990 in anticipation of the new Telecommunications Act by Andrzej Radziminski and Aleksander Szwarc with $200,000. Today, the company is valued at around $45 million.
"They were visionaries," said Piotr Pajdowski, about the company's founders. Pajdowski is R.P. Telekom's director of International and Public Relations. "Now R.P. Telekom is, in essence, the strongest among all other operators - and the only one that has money."
The first step in the company's development was to go after operators' licenses, of which they now have 12, serving 11 cities and 4 provinces.
Of those, however, only two systems are now up and running: Lublin Telkom and Telekom Puchaczow. The Lublin network was completed in October 1994, but went operational in March 1995, because negotiations on the interconnect agreement with Telekomunikacja Polska SA dragged out. Puchaczow went operational on June 2, 1995.
Thus far, R.P. Telekom has invested over $85 million in Poland, and by the year 2000, the company plans to invest a further $255 million in local telecommunications. In all, the company has $550 million ready to invest in telecommunication networks, with $430 million promised by the European Bank for Reconstruction and Development.
In November of last year the International Finance Corporation paid $7 million for an 11.67% stake in Sprint R.P. Telekom, one of two subsidiaries created by R.P.T. to manage telecommunications networks. Licenses are actually held by subsidiaries created by R.P. Telekom to operate a network in a given region.
But interest in local, land-based telecommunication networks is increasing - and with it competition. This is enhanced by changes made to the Telecommunications Act in July that require all licenses to be issued through a public tender.
Two recent entrants to the local market include the publicly listed computer company Optimus and former state monolith Elektrim. Polskie Telemedia SA - a subsidiary 100% owned by Optimus - obtained licenses in July to operate in the Krakow, Gdansk and Poznan provinces (excluding the cities themselves). Elektrim subsidiary Elektrim-TV-Tel received licenses in June to operate phone networks in the towns of Kutno, Zychlin and Leczyca. In all, 72 licenses for public networks have been issued in Poland.
But getting a license is only half the battle.
"If I'm a company that wants to start up operations, I have to have a license, but I also have to have an agreement with TPSA," Pajdowski said, noting that TPSA agreed to plug into Lublin Telekom three months after the network was operational only because a member of parliament pushed the communications minister on the subject. "This is one of the reasons that lines aren't developing faster."
Because of TPSA's market strength as a former monopoly in public networks, it is able to dictate the terms of the interconnect agreement, usually disadvantageous to the private operator. In the case of Lublin, up to 80% of income from calls originating from an R.P. Telekom phone can go to TPSA, whereas R.P. Telekom receives nothing for incoming calls originating from a TPSA operated phone.
Margins are also squeezed by TPSA practices. As the general public expects cash benefits from opening up the market to private operators, the latter are pressured into offering lower prices for phone connections. But because TPSA enjoys a monopoly on international connections, it can take a hit on local calls, making up for it from income on international calls.
Local operators can also run into road blocks when trying to lease some of the existing infrastructure - like sewage lines for laying cables, rather than digging anew. While local companies would like to do this at cost, TPSA is free to decide how much it would like to make off making these available.
"The biggest problem we have is with TPSA," Pajdowski said. "There may be no monopoly now, but there's definitely inequality." He also pointed out that this situation is not endemic only in Poland, and that Deutsche Telecom and France Telecom had similar practices.
But just as R.P. Telekom's founders realized that the telecommunications market would definitely open up in accordance with world trends, they are confident that as more local public networks ready to go on line, TPSA will change its practices. "They (TPSA) can control things, but only to a certain point," Pajdowski said. "It can't last forever."
When that happens, Greg Geris of ICC Millennium said that R.P. Telekom will be poised for an explosive growth and a strong market position. "It's really an incredible success story," he said.
But four years ago, when Szwarc was looking for partners among foreign telecommunication companies, many where hesitant, asking why they should come to Poland. "Szwarc told them: We're not forcing you - but if you come in two years, it'll be too late," Pajdowski said. "Now look at them. They're all trying to do what we've done."
R.P. Telekom S.A. - No. 3 on this week's list - was founded in 1990 in anticipation of the new Telecommunications Act by Andrzej Radziminski and Aleksander Szwarc with $200,000. Today, the company is valued at around $45 million.
"They were visionaries," said Piotr Pajdowski, about the company's founders. Pajdowski is R.P. Telekom's director of International and Public Relations. "Now R.P. Telekom is, in essence, the strongest among all other operators - and the only one that has money."
The first step in the company's development was to go after operators' licenses, of which they now have 12, serving 11 cities and 4 provinces.
Of those, however, only two systems are now up and running: Lublin Telkom and Telekom Puchaczow. The Lublin network was completed in October 1994, but went operational in March 1995, because negotiations on the interconnect agreement with Telekomunikacja Polska SA dragged out. Puchaczow went operational on June 2, 1995.
Thus far, R.P. Telekom has invested over $85 million in Poland, and by the year 2000, the company plans to invest a further $255 million in local telecommunications. In all, the company has $550 million ready to invest in telecommunication networks, with $430 million promised by the European Bank for Reconstruction and Development.
In November of last year the International Finance Corporation paid $7 million for an 11.67% stake in Sprint R.P. Telekom, one of two subsidiaries created by R.P.T. to manage telecommunications networks. Licenses are actually held by subsidiaries created by R.P. Telekom to operate a network in a given region.
But interest in local, land-based telecommunication networks is increasing - and with it competition. This is enhanced by changes made to the Telecommunications Act in July that require all licenses to be issued through a public tender.
Two recent entrants to the local market include the publicly listed computer company Optimus and former state monolith Elektrim. Polskie Telemedia SA - a subsidiary 100% owned by Optimus - obtained licenses in July to operate in the Krakow, Gdansk and Poznan provinces (excluding the cities themselves). Elektrim subsidiary Elektrim-TV-Tel received licenses in June to operate phone networks in the towns of Kutno, Zychlin and Leczyca. In all, 72 licenses for public networks have been issued in Poland.
But getting a license is only half the battle.
"If I'm a company that wants to start up operations, I have to have a license, but I also have to have an agreement with TPSA," Pajdowski said, noting that TPSA agreed to plug into Lublin Telekom three months after the network was operational only because a member of parliament pushed the communications minister on the subject. "This is one of the reasons that lines aren't developing faster."
Because of TPSA's market strength as a former monopoly in public networks, it is able to dictate the terms of the interconnect agreement, usually disadvantageous to the private operator. In the case of Lublin, up to 80% of income from calls originating from an R.P. Telekom phone can go to TPSA, whereas R.P. Telekom receives nothing for incoming calls originating from a TPSA operated phone.
Margins are also squeezed by TPSA practices. As the general public expects cash benefits from opening up the market to private operators, the latter are pressured into offering lower prices for phone connections. But because TPSA enjoys a monopoly on international connections, it can take a hit on local calls, making up for it from income on international calls.
Local operators can also run into road blocks when trying to lease some of the existing infrastructure - like sewage lines for laying cables, rather than digging anew. While local companies would like to do this at cost, TPSA is free to decide how much it would like to make off making these available.
"The biggest problem we have is with TPSA," Pajdowski said. "There may be no monopoly now, but there's definitely inequality." He also pointed out that this situation is not endemic only in Poland, and that Deutsche Telecom and France Telecom had similar practices.
But just as R.P. Telekom's founders realized that the telecommunications market would definitely open up in accordance with world trends, they are confident that as more local public networks ready to go on line, TPSA will change its practices. "They (TPSA) can control things, but only to a certain point," Pajdowski said. "It can't last forever."
When that happens, Greg Geris of ICC Millennium said that R.P. Telekom will be poised for an explosive growth and a strong market position. "It's really an incredible success story," he said.
But four years ago, when Szwarc was looking for partners among foreign telecommunication companies, many where hesitant, asking why they should come to Poland. "Szwarc told them: We're not forcing you - but if you come in two years, it'll be too late," Pajdowski said. "Now look at them. They're all trying to do what we've done."
