Equipment makers clean up as cellular phone use skyrockets
"Poland is one of the strongest markets in the world" for sales of mobile phones and the equipment used in GSM networks, said Ryszard lada, country manager for Motorola. He said GSM's arrival "has had an incredible effect" on the telecom equipment market here.
lada refused to disclose Motorola's sales in Poland or even the percentage growth over the last year. But competitor Ericsson watched its sales swell 20-25% in the last 12 months, said Bjorn Magnusson, president of Ericsson Poland. Mobile phone sales alone have grown 50% this year in comparison to the first six months of last year, he said.
The number of mobile phone users here has surged from 100,000 about 18 months ago to more than 1 million today. One of three providers here, Polkomtel ("Plus GSM") has seen its subscriber base rise 66% in the last eight months, from 300,000 at the end of 1997 to 500,000 today, said Leszek Kaminski, Plus GSM spokesman.
Despite this growth, though, only 3% of the Polish public uses mobile phones, a relatively low number in comparison to Western European markets such as Finland which carry a 40% penetration rate.
According to government estimates, the number of mobile phone users is expected to reach 3 million by 2001, or 7.9% of the population. The number of subscribers for traditional fixed-line telephones should hit 13 million, according to estimates, with TPSA absorbing 11 million of those and private operators, such as Netia Telekom, grabbing 2 million.
The growth in both areas is expected to flow even more equipment contracts and mobile phone sales the equipment makers' way. None of the companies interviewed, however, were able to spell out the current size of the telecom equipment market here for GSM-related sales.
Excluding GSM sales, the value of the Polish telecom equipment market will be about $1.2 billion in 1998, said Dorota Niemczynowicz, marketing director for Lucent Technologies Poland. This is about one-quarter the size of most Western European telecom markets, she added.
Motorola's lada said that Poland's fast-paced economic growth - gross domestic product (GDP) has expanded about 5-6% annually for several years - makes it one of the more dynamic telecom equipment markets. He also said that GSM services have helped fill the pent-up demand for telephone services, which TPSA has largely been unable to meet.
"Everyone sort of started all over again when the wall came down in 1989," lada said. "GSM is just simply a grand step towards the modernization of Polish business."
One main reason behind the popularity of mobile phones in Poland is the low number of phone lines in the country. Poland currently has about 19 telephone lines per 100 residents, a sparse number in comparison to the 30 lines per 100 residents in both the Czech Republic and Hungary. European Union countries have an average of 54 lines per 100 residents.
Mobile phone demand is "a combination of ... mobility and the difficulty of getting a fixed line," said Ericsson Financial Director Michael Rasmussen.
Sales growth is also boosted by the numerous special packages offered to customers. But while these promotional deals have generated high sales numbers, they have also turned the mobile phone market into a high-volume, low-margin business dominated by a few large players.
The majority of Plus GSM's subscribers bought their mobile phones during a promotion at a cost of around zl. 400 including an activation charge, a rate far lower than paying Plus GSM's full price of zl. 1,200-zl. 3,000, Plus' Kaminski said. He would not reveal how much Plus GSM pays producers for phones.
Mobile phone sales competition is a fierce, high-volume business, said Ericsson's Magnusson.
GSM operators "take us for everything they can," he said. "When you're talking about telecom in general, you have to have a lot of muscle to break in."
"Margins are definitely getting squeezed," said Motorola's lada. However, he said it is still a profitable business for Motorola.
Equipment makers said mobile service providers Polska Telefonia Cyfrowa (Era GSM) and Plus are forcing down prices on phones, which means a company must make a better offer than a large distributor, such as Nokia, to make a sale, said Stefan Kosnowski, director of Veris, a company that assembles and manufactures telephones and answering machines.
The major players didn't dispute that. "You tend to see that there's really strong competition between the big players," lada said. Its "quite tough" for smaller companies to break in.
Most telecom equipment companies see a continuation of this growth in the future, particularly as TPSA's monopoly begins to erode. The company's main competitor, Netia, already offers telephone service here, and several private providers are building networks in different regions of the country. According to the government's estimates, those operators and TPSA will have to invest a combined zl. 20 billion ($5.7 billion) by 2001 to reach the 13 million expected telephone subscribers.
Netia's investment in Polish telecommunications from the beginning of 1996 until mid-1998 already exceeded $220 million, said Financial Director Joseph Gamor. The company will spend about $120 million per year over the next five years to expand its network. Of this $120 million, about 30% will go toward purchasing equipment.
This year, about one-third of Lucent's revenue came from sales to private operators, a 50% increase from last year. The company recently signed a five-year contract with Netia to supply and install a digital switching system, it said.
Motorola is also benefiting from the privatization of the telecom market. The company provides TPSA with a digital telephony network for fixed users and is in discussions with Netia.
lada refused to disclose Motorola's sales in Poland or even the percentage growth over the last year. But competitor Ericsson watched its sales swell 20-25% in the last 12 months, said Bjorn Magnusson, president of Ericsson Poland. Mobile phone sales alone have grown 50% this year in comparison to the first six months of last year, he said.
The number of mobile phone users here has surged from 100,000 about 18 months ago to more than 1 million today. One of three providers here, Polkomtel ("Plus GSM") has seen its subscriber base rise 66% in the last eight months, from 300,000 at the end of 1997 to 500,000 today, said Leszek Kaminski, Plus GSM spokesman.
Despite this growth, though, only 3% of the Polish public uses mobile phones, a relatively low number in comparison to Western European markets such as Finland which carry a 40% penetration rate.
According to government estimates, the number of mobile phone users is expected to reach 3 million by 2001, or 7.9% of the population. The number of subscribers for traditional fixed-line telephones should hit 13 million, according to estimates, with TPSA absorbing 11 million of those and private operators, such as Netia Telekom, grabbing 2 million.
The growth in both areas is expected to flow even more equipment contracts and mobile phone sales the equipment makers' way. None of the companies interviewed, however, were able to spell out the current size of the telecom equipment market here for GSM-related sales.
Excluding GSM sales, the value of the Polish telecom equipment market will be about $1.2 billion in 1998, said Dorota Niemczynowicz, marketing director for Lucent Technologies Poland. This is about one-quarter the size of most Western European telecom markets, she added.
Motorola's lada said that Poland's fast-paced economic growth - gross domestic product (GDP) has expanded about 5-6% annually for several years - makes it one of the more dynamic telecom equipment markets. He also said that GSM services have helped fill the pent-up demand for telephone services, which TPSA has largely been unable to meet.
"Everyone sort of started all over again when the wall came down in 1989," lada said. "GSM is just simply a grand step towards the modernization of Polish business."
One main reason behind the popularity of mobile phones in Poland is the low number of phone lines in the country. Poland currently has about 19 telephone lines per 100 residents, a sparse number in comparison to the 30 lines per 100 residents in both the Czech Republic and Hungary. European Union countries have an average of 54 lines per 100 residents.
Mobile phone demand is "a combination of ... mobility and the difficulty of getting a fixed line," said Ericsson Financial Director Michael Rasmussen.
Sales growth is also boosted by the numerous special packages offered to customers. But while these promotional deals have generated high sales numbers, they have also turned the mobile phone market into a high-volume, low-margin business dominated by a few large players.
The majority of Plus GSM's subscribers bought their mobile phones during a promotion at a cost of around zl. 400 including an activation charge, a rate far lower than paying Plus GSM's full price of zl. 1,200-zl. 3,000, Plus' Kaminski said. He would not reveal how much Plus GSM pays producers for phones.
Mobile phone sales competition is a fierce, high-volume business, said Ericsson's Magnusson.
GSM operators "take us for everything they can," he said. "When you're talking about telecom in general, you have to have a lot of muscle to break in."
"Margins are definitely getting squeezed," said Motorola's lada. However, he said it is still a profitable business for Motorola.
Equipment makers said mobile service providers Polska Telefonia Cyfrowa (Era GSM) and Plus are forcing down prices on phones, which means a company must make a better offer than a large distributor, such as Nokia, to make a sale, said Stefan Kosnowski, director of Veris, a company that assembles and manufactures telephones and answering machines.
The major players didn't dispute that. "You tend to see that there's really strong competition between the big players," lada said. Its "quite tough" for smaller companies to break in.
Most telecom equipment companies see a continuation of this growth in the future, particularly as TPSA's monopoly begins to erode. The company's main competitor, Netia, already offers telephone service here, and several private providers are building networks in different regions of the country. According to the government's estimates, those operators and TPSA will have to invest a combined zl. 20 billion ($5.7 billion) by 2001 to reach the 13 million expected telephone subscribers.
Netia's investment in Polish telecommunications from the beginning of 1996 until mid-1998 already exceeded $220 million, said Financial Director Joseph Gamor. The company will spend about $120 million per year over the next five years to expand its network. Of this $120 million, about 30% will go toward purchasing equipment.
This year, about one-third of Lucent's revenue came from sales to private operators, a 50% increase from last year. The company recently signed a five-year contract with Netia to supply and install a digital switching system, it said.
Motorola is also benefiting from the privatization of the telecom market. The company provides TPSA with a digital telephony network for fixed users and is in discussions with Netia.
