GSM tender closes with three bids
Those who dropped out of the bidding cited the high concession fees and uncertainty over interconnect and line lease fees (up to $95 million annually) - payable to state-owned telephone monopoly Telekomunikacja Polska SA (TPSA) - as the main reasons for deciding against bidding for the licenses.
The current dispute between the Polish government and foreign partners in PTK Centertel, operator of an analog cellular-telephone network, also has cast a dark cloud over the telecom industry.
Together these factors made the risk in building the system higher than the expected return for some potential bidders.
"There were just too many risky elements," said Piotr Pajdowski, director of international and public relations for R.P. Telekom SA. "There was no way of telling what the fate of the whole thing would be." R.P. Telekom, in partnership with Goldman Sachs among others, decided not to participate in the tender only hours before bids had to be filed.
The consortia to file bids were Polska Telefonia Cyfrowa (Elektrim, DeTeMobil, US West), Polkomtel (Petrochemia Plock, Tele Danmark, AirTouch) and Ciech with STET. The concession fee was set at ECU 100 million ($130 million), with a variable fee from ECU 80 ($105) to ECU 130 ($170) for each subscriber. The total investment is expected to reach $1.4 billion per consortium.
On Tuesday France Telecom, the minority French partner (24.5%) in Centertel, issued a notification of arbitration against the Polish government and TPSA, claiming TPSA and the government broke commitments that would have allowed Centertel to obtain a GSM license without a tender. France Telecom is seeking compensation to the tune of $500 million.
Ameritech, Centertel's other foreign partner, announced its intent to take the issue to international arbitration in mid-November. The cases will be heard out at the International Court of Justice in the Hague. Both cases are based on bilateral investment treaties signed between Poland and their respective home countries.
A lack of clarity on terms of cooperation between those that win the GSM licenses and TPSA also increased the risk factor, making financial planning difficult.
"I see the situation with Centertel as an embarrassment for the whole process, but the main reason we dropped out was that we weren't able to work out a business plan that we could believe in," said Christer Nykopp, director of international business strategy for Telecom Finland, which withdrew from the GSM bid in late December. "We weren't told how much the interconnect fees would be, or how much it would cost to lease lines for the base station - they couldn't give us any firm answers.
"There was just a lot of uncertainty involved in the whole thing," Nykopp said. Telecom Finland had planned to bid in a consortium with German Vebacom and Polish computer firm Optimus SA.
Other companies to turn their backs on the tender include Bell Atlantic, Southwestern Bell, AT&T, and Mannesmann.
But several companies were willing to swallow the risk, counting on the fact that the government has had enough scandals to last for a while and will work with the winners to smoothly develop the GSM networks.
"The tender was very clear except for the interconnections, which does make it hard to business plan," said Paul Wolters, managing director of DeTeMobil's Warsaw office. "But you have to figure certain tendencies. There may be some discussion and some fights, but the ministry would not want another Centertel."
Wolters said the most difficult part of preparing for the tender was finding a Polish partner with financial resources. According to tender rules, the consortium must be 51% Polish owned, and foreign partners were looking for financial commitments somewhat in line with the ownership structure.
For DeTeMobil, the decision to participate was also influenced by politics. "It is also a policy - the German government is very engaged in getting Poland into the EU, and DeTeMobil is a state-owned company," Wolters explained. "I can imagine that some said the risk was too high here, but to do business you have to have a strong vision of the market."
The current dispute between the Polish government and foreign partners in PTK Centertel, operator of an analog cellular-telephone network, also has cast a dark cloud over the telecom industry.
Together these factors made the risk in building the system higher than the expected return for some potential bidders.
"There were just too many risky elements," said Piotr Pajdowski, director of international and public relations for R.P. Telekom SA. "There was no way of telling what the fate of the whole thing would be." R.P. Telekom, in partnership with Goldman Sachs among others, decided not to participate in the tender only hours before bids had to be filed.
The consortia to file bids were Polska Telefonia Cyfrowa (Elektrim, DeTeMobil, US West), Polkomtel (Petrochemia Plock, Tele Danmark, AirTouch) and Ciech with STET. The concession fee was set at ECU 100 million ($130 million), with a variable fee from ECU 80 ($105) to ECU 130 ($170) for each subscriber. The total investment is expected to reach $1.4 billion per consortium.
On Tuesday France Telecom, the minority French partner (24.5%) in Centertel, issued a notification of arbitration against the Polish government and TPSA, claiming TPSA and the government broke commitments that would have allowed Centertel to obtain a GSM license without a tender. France Telecom is seeking compensation to the tune of $500 million.
Ameritech, Centertel's other foreign partner, announced its intent to take the issue to international arbitration in mid-November. The cases will be heard out at the International Court of Justice in the Hague. Both cases are based on bilateral investment treaties signed between Poland and their respective home countries.
A lack of clarity on terms of cooperation between those that win the GSM licenses and TPSA also increased the risk factor, making financial planning difficult.
"I see the situation with Centertel as an embarrassment for the whole process, but the main reason we dropped out was that we weren't able to work out a business plan that we could believe in," said Christer Nykopp, director of international business strategy for Telecom Finland, which withdrew from the GSM bid in late December. "We weren't told how much the interconnect fees would be, or how much it would cost to lease lines for the base station - they couldn't give us any firm answers.
"There was just a lot of uncertainty involved in the whole thing," Nykopp said. Telecom Finland had planned to bid in a consortium with German Vebacom and Polish computer firm Optimus SA.
Other companies to turn their backs on the tender include Bell Atlantic, Southwestern Bell, AT&T, and Mannesmann.
But several companies were willing to swallow the risk, counting on the fact that the government has had enough scandals to last for a while and will work with the winners to smoothly develop the GSM networks.
"The tender was very clear except for the interconnections, which does make it hard to business plan," said Paul Wolters, managing director of DeTeMobil's Warsaw office. "But you have to figure certain tendencies. There may be some discussion and some fights, but the ministry would not want another Centertel."
Wolters said the most difficult part of preparing for the tender was finding a Polish partner with financial resources. According to tender rules, the consortium must be 51% Polish owned, and foreign partners were looking for financial commitments somewhat in line with the ownership structure.
For DeTeMobil, the decision to participate was also influenced by politics. "It is also a policy - the German government is very engaged in getting Poland into the EU, and DeTeMobil is a state-owned company," Wolters explained. "I can imagine that some said the risk was too high here, but to do business you have to have a strong vision of the market."
