Feet on the ground

Cezary Przybysławski knows the danger of sticking one's head in the clouds. Like so many other telecom companies a couple of years ago, his company Szeptel, a local phone operator based in northeastern Poland, spent excessively and accumulated debt while trying to build a national high-speed data transmission network that promised sky-high profits. Appointed in March to restructure the indebted company and devise a new short-term strategy, Przybysławski is now replanting Szeptel on firmer ground with a much scaled-down version of its previous grand plan to build a 5,000-kilometer network. Instead, the firm will construct a new 300-kilometer stretch of lines along Poland's eastern border, an area devoid of data transmission service.

Basic strategy It's part of Szeptel's new strategy to focus on two main business areas: basic calling service in the Szepietowo region and data transmission service. Though Przybysławski declined to say how much Szeptel needs to construct the new eastern border line, it will be far less than the zł. 800 million-zł. 900 million ($200 million-$225 million) the firm planned to spend on the construction of the countrywide backbone from 2000-2005. Eastern Poland, which has no serious telecom contenders other than dominant national operator Telekomunikacja Polska (TPSA), is ripe for an alternative data transmission provider, Przybysławski said. Poland's likely European Union membership in 2004 will bring increased demands for services as its eastern border will mark the EU's expanded boundary. Customs services, warehouses and wholesalers will need a less expensive alternative provider whose service will enable them to manage transit activities, he said.

The rise and fall Szeptel rose from humble beginnings in 1992 as an independent fixed-line operator in Szepietowo and Łomża. Today about 90% of the firm's income comes from its 25,000 clients who use its calling service in northeastern Poland. Caught up in the telecom frenzy of 2000, Szeptel initiated its national data transmission project, but the plan fizzled last year after a couple of unsuccessful attempts to issue new shares and the firm's failure to complete an investment deal with Danish telecom TDC. Despite disastrous results in 2001 with a zł. 17 million ($4.25 million) loss on revenue of zł. 18 million ($4.5 million), Przybysławski expects Szeptel to break even this year and generate a profit in 2003 - a difficult prospect considering the company's loss of zł. 1.58 million ($395,000) in the first quarter and its current debt of about zł. 70 million ($17.5 million). Szeptel's financial turnaround hinges partly on the zł. 60 million ($15 million) revenue that Przybysławski expects from a new data transmission line from Warsaw to the Czech Republic border that will open in July. The line will give Szeptel's clients international data transmission capabilities based on its agreements with operators outside Poland. When the line shows a profit, Przybysławski said it would be easier for the company to obtain more funding from its shareholders - mainly Polish banks - to continue its program.

Przybysławski has taken other measures to turn around Szeptel. He is in the process of getting rid of the firm's loss-making Internet-related units on which it spent a collective zł. 5 million ($1.25 million). He is also hoping to gain 10,000 new private and business clients in the northeast from a 300-kilometer data transmission line from Warsaw to Białystok, which opened in April. The company invested zł. 5 million ($1.25 million) in the new service, called Interspeed, which offers Białystok area clients a package of telephone service and Internet access, Przybysławski said. Still, Szeptel will need investors to provide more than the current zł. 80 million ($20 million) the company has planned to put into its network this year to construct the line along the eastern border. Nevertheless, Przybysławski said Szeptel could reach profitability with its scaled-down strategy. "It's impossible for a small company to be great," he said. "It's better that the company is standing on the earth and not up in the sky."