EU to tighten screws on TPSA and craft customer-friendly market
Not only do they keep the public connected, but their usually pricy advertising campaigns make them the darlings of the ad agencies, while their high turnover and complicated shareholder structures make them the favorites of both foreign and local investors.
Given these tributes, plus EU membership, the market expects an increasingly competitive near future in which prices will fall across the board as branding comes to the forefront. Furthermore, a handful of key acquisitions on the part of local players, such as Netia, and foreigners, including Vodafone and Deutsche Telekom, are expected.
Much of this has been on the cards for sometime now. But probably the most anticipated action is the inevitable fall in prices that has occurred among mobile operators, especially in the neighboring Czech Republic and Hungary, but which has been slow going in Poland.
"First, you're going to have the tariffs decreasing," says Bob Creamer, analyst as CDM Pekao.
The drop in rates will be most prominent on the mobile market, as operators have already begun to offer unexpectedly low prices. And a competitive market in which the three operators have almost equivalent market shares promises that pricing pressure will continue.
Polska Telefonia Cyfrowa, the operator of the Era network, recently launched Heyah, a prepaid service aimed at younger, price-sensitive users, while, as Creamer notes, Centertel, the operator of Idea, also offers similar services.
The mobile firms are able to offer their prepaid clients lower rates because they are following a trend of selling minutes separate from handsets, something Czech and Hungarian users have already experienced. Traditionally, operators subsidized the high prices of their handsets with higher tariffs. As mobile markets have matured, there has been a decreasing demand for this practice.
"I think this has already started. You see that big red hand?" asks Creamer, pointing to the Heyah marketing strategy that had cartoonish red hands splashed on billboards about Warsaw and other major cities. "Prices must fall."
This factor will also hasten what many consider to be the inevitable migration from fixed services to mobile. In Hungary and the Czech Republic, this has occurred apace; in Poland not so quickly.
Centertel, however, doesn't expect the dynamics of the entire industry to change much.
Jacek Kalinowski, spokesman, says that for Centertel, the immediate future is business as usual.
Fully acknowledging the prepaid price wars in the industry, he notes that Centertel would continue to focus on postpaid customers. That client base has been the bread and butter of the company's plans, as it boasts just a tick under half of all postpaid users as its own.
"Our strategy is to focus specifically on high-end users in the postpaid segment," Kalinowski says. "Every customer in the postpaid segment uses more services, such as GPRS."
But that doesn't mean the company intends to ignore the prepaid segment.
He explains, too, that the average revenue per user (ARPU) for postpaid clients is much higher than in the prepaid sector. He estimates that Centertel's postpaid ARPU stands at zł.100, as compared to a prepaid ARPU figure of zł.30. In this light, the company would like to maintain a 50-50 postpaid to prepaid ratio.
Most competitors are also hoping that accession will finally make the country's regulator accountable to the anticompetitive realities of the market.
Wojciech Mądalski, Netia's chief executive, has been eagerly awaiting EU membership for the very reason that the telecom regulator (URTiP) will soon have to answer to Brussels.
Pekao's Creamer points out that, in terms of actual telecom regulations, Poland is on a par with many Western countries. But, "in practice," the watchdog falls short, with the near monopoly of TP SA holding sway over its decisions, leaving alternative providers, such as Netia and Energis, sidelined when they want quick decisions on, for instance, opening up new interconnect points.
"What will change is the increased scrutiny from Brussels," says Mądalski. "This will hopefully make it easier for alternative providers and more difficult for TP SA."
Mądalski, at the head of Netia, also hopes to spearhead another important development in the fixed and mobile segments. Netia has been the prime fixed-line industry consolidator and will continue to be so as it aggressively pursues KGHM-owned Telefonia Dialog. In a long anticipated deal, Netia bought Elektrim-owned El-Net earlier this year and, in buying Telefonia Dialog, it intends to cobble together a more formidable competitor to TP SA.
"Nothing's changing in terms of the EU as regards our consolidation plans," Mądalski notes. Analysts expect the same, as Netia is the most likely buyer for Dialog. All of the other potential buys that have come forward represent private equity houses. And, as Creamer points out, Netia is likely to pay the highest price for the deal. He said that he would expect the company to try to pay for Dialog with shares.
That could pose a slight problem because cash-strapped KGHM might demand cash. And private equity houses would certainly be able to buck up for that. A deal is expected to be closed within a year, as KGHM looks eager to sell its fixed-line assets.
Mobile operators are also on the move. In the next year, the market expects Deutsche Telekom, after much litigation, to gain majority control of PTC, the largest mobile provider, and re-brand it as T-Mobile, as it has done with its other foreign holdings. The culmination of the deal awaits several decisions by the parties involved, namely Elektrim, Elektrim Telekomunikacja and Vivendi, all of which would benefit from a speedy resolution.
But, Creamer says, the ball is in Deutsche Telekom's court as it will be able to wait a longer time to buy than the owners can wait to sell. And, what's more, the longer the wait, the lower the price, he says.
Also, state-owned Polkomtel, the operator behind Plus GSM, is on the selling blocks, although no privatization advisor has been selected yet. Polkomtel, which is part owned by KGHM, is almost universally expected to go to Vodafone and TDC. The latter two foreign companies have publicly stated their interest in gaining majority stakes in the asset. This would likely lead to Plus GSM being re-branded as Vodafone. Such a move would follow what TDC and Vodafone have done in Denmark, where they call their co-owned operator Vodafone.
All in all, the changing of ownership, lowering of prices and more assertive regulation should lead to a more customer friendly market. And, for customers, it's about time.
Given these tributes, plus EU membership, the market expects an increasingly competitive near future in which prices will fall across the board as branding comes to the forefront. Furthermore, a handful of key acquisitions on the part of local players, such as Netia, and foreigners, including Vodafone and Deutsche Telekom, are expected.
Much of this has been on the cards for sometime now. But probably the most anticipated action is the inevitable fall in prices that has occurred among mobile operators, especially in the neighboring Czech Republic and Hungary, but which has been slow going in Poland.
"First, you're going to have the tariffs decreasing," says Bob Creamer, analyst as CDM Pekao.
The drop in rates will be most prominent on the mobile market, as operators have already begun to offer unexpectedly low prices. And a competitive market in which the three operators have almost equivalent market shares promises that pricing pressure will continue.
Polska Telefonia Cyfrowa, the operator of the Era network, recently launched Heyah, a prepaid service aimed at younger, price-sensitive users, while, as Creamer notes, Centertel, the operator of Idea, also offers similar services.
The mobile firms are able to offer their prepaid clients lower rates because they are following a trend of selling minutes separate from handsets, something Czech and Hungarian users have already experienced. Traditionally, operators subsidized the high prices of their handsets with higher tariffs. As mobile markets have matured, there has been a decreasing demand for this practice.
"I think this has already started. You see that big red hand?" asks Creamer, pointing to the Heyah marketing strategy that had cartoonish red hands splashed on billboards about Warsaw and other major cities. "Prices must fall."
This factor will also hasten what many consider to be the inevitable migration from fixed services to mobile. In Hungary and the Czech Republic, this has occurred apace; in Poland not so quickly.
Centertel, however, doesn't expect the dynamics of the entire industry to change much.
Jacek Kalinowski, spokesman, says that for Centertel, the immediate future is business as usual.
Fully acknowledging the prepaid price wars in the industry, he notes that Centertel would continue to focus on postpaid customers. That client base has been the bread and butter of the company's plans, as it boasts just a tick under half of all postpaid users as its own.
"Our strategy is to focus specifically on high-end users in the postpaid segment," Kalinowski says. "Every customer in the postpaid segment uses more services, such as GPRS."
But that doesn't mean the company intends to ignore the prepaid segment.
He explains, too, that the average revenue per user (ARPU) for postpaid clients is much higher than in the prepaid sector. He estimates that Centertel's postpaid ARPU stands at zł.100, as compared to a prepaid ARPU figure of zł.30. In this light, the company would like to maintain a 50-50 postpaid to prepaid ratio.
Most competitors are also hoping that accession will finally make the country's regulator accountable to the anticompetitive realities of the market.
Wojciech Mądalski, Netia's chief executive, has been eagerly awaiting EU membership for the very reason that the telecom regulator (URTiP) will soon have to answer to Brussels.
Pekao's Creamer points out that, in terms of actual telecom regulations, Poland is on a par with many Western countries. But, "in practice," the watchdog falls short, with the near monopoly of TP SA holding sway over its decisions, leaving alternative providers, such as Netia and Energis, sidelined when they want quick decisions on, for instance, opening up new interconnect points.
"What will change is the increased scrutiny from Brussels," says Mądalski. "This will hopefully make it easier for alternative providers and more difficult for TP SA."
Mądalski, at the head of Netia, also hopes to spearhead another important development in the fixed and mobile segments. Netia has been the prime fixed-line industry consolidator and will continue to be so as it aggressively pursues KGHM-owned Telefonia Dialog. In a long anticipated deal, Netia bought Elektrim-owned El-Net earlier this year and, in buying Telefonia Dialog, it intends to cobble together a more formidable competitor to TP SA.
"Nothing's changing in terms of the EU as regards our consolidation plans," Mądalski notes. Analysts expect the same, as Netia is the most likely buyer for Dialog. All of the other potential buys that have come forward represent private equity houses. And, as Creamer points out, Netia is likely to pay the highest price for the deal. He said that he would expect the company to try to pay for Dialog with shares.
That could pose a slight problem because cash-strapped KGHM might demand cash. And private equity houses would certainly be able to buck up for that. A deal is expected to be closed within a year, as KGHM looks eager to sell its fixed-line assets.
Mobile operators are also on the move. In the next year, the market expects Deutsche Telekom, after much litigation, to gain majority control of PTC, the largest mobile provider, and re-brand it as T-Mobile, as it has done with its other foreign holdings. The culmination of the deal awaits several decisions by the parties involved, namely Elektrim, Elektrim Telekomunikacja and Vivendi, all of which would benefit from a speedy resolution.
But, Creamer says, the ball is in Deutsche Telekom's court as it will be able to wait a longer time to buy than the owners can wait to sell. And, what's more, the longer the wait, the lower the price, he says.
Also, state-owned Polkomtel, the operator behind Plus GSM, is on the selling blocks, although no privatization advisor has been selected yet. Polkomtel, which is part owned by KGHM, is almost universally expected to go to Vodafone and TDC. The latter two foreign companies have publicly stated their interest in gaining majority stakes in the asset. This would likely lead to Plus GSM being re-branded as Vodafone. Such a move would follow what TDC and Vodafone have done in Denmark, where they call their co-owned operator Vodafone.
All in all, the changing of ownership, lowering of prices and more assertive regulation should lead to a more customer friendly market. And, for customers, it's about time.
