Long-distance delay attributed to upcoming TPSA sale
While the Communications Ministry originally said it would issue the tender by the end of January, analysts now say they do not expect the government to do anything until the second half of the year. One factor is the turmoil surrounding the Communications Ministry, which may be overhauled and combined with another ministry. Analysts also said the government was worried that awarding the licenses will make TPSA less attractive and therefore fetch a lower price from a strategic investor.
"Calling the tender right now would be suicidal for the government, which is now looking for a privatization adviser to sell TPSA," said an analyst, who wished to remain unnamed.
He said the government was counting on a high selling price, while analysts are already lowering their valuation of the stock in expectation of increased competition from potential long-distance operators. Three investment banks, ABN Amro Securities, Credit Lyonnais Securities and Nomura International, already downgraded the stock.
"This is another example that the main job of the ministry is to protect TPSA," said Netia Telekom's President Meir Srebernik. The second largest local fixed-line operator after TPSA, Netia already has networks in such cities as Krakow, Katowice, Gdansk, Poznan, and Lublin.
At the same time, the Communciations Ministry has already come under fire for awarding the local operator's license for Warsaw to Elektrim-controlled Regionalne Sieci Telekomunikacyjne El-Net. Competitors Netia and Aster City Cable contend that the government should have taken into account the recent problems Elektrim has had with the Securities Commission (KPWiG).
The prosecutor's office is looking into Elektrim for failing to disclose to shareholders existing agreements with Deutsche Telekom to take a stake in El-Net as well as leaving investors in the dark about an agreement to sell shares in Polska Telefonia Cyfrowa (Era GSM) to Kulczyk Holding for a fraction of their worth.
That, analysts said, has made the ministry reluctant to move quickly on the long-distance tender. The ministry is also unsure of its own status, as the government is talking about creating a "super ministry" that may not be headed by current minister Marek Zdrojewski.
"He may be one to go," the source said.
Other observers said that a possible political shakeup was not behind the delay. "I do not think the current political situation will have a big influence on the developments of the telecommunications market," said Tomasz Pokrywka, an analyst at Raiffeissen Capital & Investment.
But Jerzy Kalinowski, a telecom analyst at PricewaterhouseCoopers, said that a new minister may have a different set of priorities that would be in conflict with issuing the long-distance tender now.
"The new person responsible for (the government's policy on) telecommunications may have different priorities concerning the further liberalization of the market vs. increasing the government's potential revenue from the sale of the current monopolist TPSA," he said. "While the second phase of privatization of TPSA is underway, the company's adviser will want to make the company's revenue as high as possible. This is natural."
In the end, Kalinowski said, "the future adviser for the privatization of TPSA will try to block the process of demonopolization."
The appearance of long-distance competitors on the market could negatively affect TPSA's results as early as next year, said Michal Buczynski, an analyst at COK Banku Handlowego.
One analyst had previously said that the competitors could carve out as much as 30% of the telephone market, of which TPSA now controls more than 90%.
The two most likely bidders for the licenses - Polish Railways (PKP) and Tel-Energo, a subsidiary of Polish Power Grid (PSE) - have kept quiet on the issue. Both already have extensive fiber-optic networks in place, and any license winner will most likely have to bring one or both of the companies into their venture, analysts said.
"We are not happy that the tender is delayed but getting the license is not our 'to be or not to be'," said Hanna Kontkiewicz-Chachulska, the public relations director at Tel-Energo. "We are leasing our lines to other operators and corporations."
She said, however, that a delay in announcing the tender is making future competition with TPSA tougher. "First of all, it will be detrimental for the market," she said. "The Communications Ministry should first of all think about its development."
While Netia also intends to bid for a long-distance license, Srebernik said that the delay in calling the tender right now could be disadvantageous for competitors. The way the tender stands now, any bidders would have to have 50% Polish ownership.
"We are afraid the tender will be simplistic, and it will disadvantage foreign companies such as Netia," he said. "Netia was able to invest a lot because it has foreign capital."
He said that 80% of local telephone lines now running are operated by companies that have foreign ownership, such as Telefonia Pilicka and Telefonia Zachod.
"We should wait until the new telecom law is in force," Srebernik said, adding that he hoped the new law would do away with the requirement.
While the long-distance license might gauge TPSA's price, the company's value would bump up if the ministry goes ahead with another tender for mobile frequencies. TPSA's value could rise by as much as $500 million if it got one of those licenses, the unnamed analyst said. The company currently has a market capitalization of zl. 30.8 billion ($8.32 billion).
"Certainly, if we had the license for the GSM 900 frequency, it would increase the value of TPSA," said Jacek Kalinowski, a spokesperson for Centertel, which is majority owned by TPSA.
The company, one of three mobile-phone firms, is now operating a DCS (GSM 1800) digital system and an older analog system, and would like to add the GSM 900 service to its offerings.
Robert Kantek, TPSA's representative in Centertel's board, admitted that TPSA had been lobbying the ministry for this. "Ideally there should be a tender for a mobile phone, then the sale of TPSA, and only then a license for long-distance operators," Kantek said.
He also said that the mobile-phone licenses could be granted to the existing operators without calling a tender. Miroslaw luniewski, the spokesman for the ministry, said that the common understanding was that the tender should be called for three licenses at the same time. "It hasn't been written anywhere, though," he said.
He could not say, however, when any of the tenders would be announced.
"Calling the tender right now would be suicidal for the government, which is now looking for a privatization adviser to sell TPSA," said an analyst, who wished to remain unnamed.
He said the government was counting on a high selling price, while analysts are already lowering their valuation of the stock in expectation of increased competition from potential long-distance operators. Three investment banks, ABN Amro Securities, Credit Lyonnais Securities and Nomura International, already downgraded the stock.
"This is another example that the main job of the ministry is to protect TPSA," said Netia Telekom's President Meir Srebernik. The second largest local fixed-line operator after TPSA, Netia already has networks in such cities as Krakow, Katowice, Gdansk, Poznan, and Lublin.
At the same time, the Communciations Ministry has already come under fire for awarding the local operator's license for Warsaw to Elektrim-controlled Regionalne Sieci Telekomunikacyjne El-Net. Competitors Netia and Aster City Cable contend that the government should have taken into account the recent problems Elektrim has had with the Securities Commission (KPWiG).
The prosecutor's office is looking into Elektrim for failing to disclose to shareholders existing agreements with Deutsche Telekom to take a stake in El-Net as well as leaving investors in the dark about an agreement to sell shares in Polska Telefonia Cyfrowa (Era GSM) to Kulczyk Holding for a fraction of their worth.
That, analysts said, has made the ministry reluctant to move quickly on the long-distance tender. The ministry is also unsure of its own status, as the government is talking about creating a "super ministry" that may not be headed by current minister Marek Zdrojewski.
"He may be one to go," the source said.
Other observers said that a possible political shakeup was not behind the delay. "I do not think the current political situation will have a big influence on the developments of the telecommunications market," said Tomasz Pokrywka, an analyst at Raiffeissen Capital & Investment.
But Jerzy Kalinowski, a telecom analyst at PricewaterhouseCoopers, said that a new minister may have a different set of priorities that would be in conflict with issuing the long-distance tender now.
"The new person responsible for (the government's policy on) telecommunications may have different priorities concerning the further liberalization of the market vs. increasing the government's potential revenue from the sale of the current monopolist TPSA," he said. "While the second phase of privatization of TPSA is underway, the company's adviser will want to make the company's revenue as high as possible. This is natural."
In the end, Kalinowski said, "the future adviser for the privatization of TPSA will try to block the process of demonopolization."
The appearance of long-distance competitors on the market could negatively affect TPSA's results as early as next year, said Michal Buczynski, an analyst at COK Banku Handlowego.
One analyst had previously said that the competitors could carve out as much as 30% of the telephone market, of which TPSA now controls more than 90%.
The two most likely bidders for the licenses - Polish Railways (PKP) and Tel-Energo, a subsidiary of Polish Power Grid (PSE) - have kept quiet on the issue. Both already have extensive fiber-optic networks in place, and any license winner will most likely have to bring one or both of the companies into their venture, analysts said.
"We are not happy that the tender is delayed but getting the license is not our 'to be or not to be'," said Hanna Kontkiewicz-Chachulska, the public relations director at Tel-Energo. "We are leasing our lines to other operators and corporations."
She said, however, that a delay in announcing the tender is making future competition with TPSA tougher. "First of all, it will be detrimental for the market," she said. "The Communications Ministry should first of all think about its development."
While Netia also intends to bid for a long-distance license, Srebernik said that the delay in calling the tender right now could be disadvantageous for competitors. The way the tender stands now, any bidders would have to have 50% Polish ownership.
"We are afraid the tender will be simplistic, and it will disadvantage foreign companies such as Netia," he said. "Netia was able to invest a lot because it has foreign capital."
He said that 80% of local telephone lines now running are operated by companies that have foreign ownership, such as Telefonia Pilicka and Telefonia Zachod.
"We should wait until the new telecom law is in force," Srebernik said, adding that he hoped the new law would do away with the requirement.
While the long-distance license might gauge TPSA's price, the company's value would bump up if the ministry goes ahead with another tender for mobile frequencies. TPSA's value could rise by as much as $500 million if it got one of those licenses, the unnamed analyst said. The company currently has a market capitalization of zl. 30.8 billion ($8.32 billion).
"Certainly, if we had the license for the GSM 900 frequency, it would increase the value of TPSA," said Jacek Kalinowski, a spokesperson for Centertel, which is majority owned by TPSA.
The company, one of three mobile-phone firms, is now operating a DCS (GSM 1800) digital system and an older analog system, and would like to add the GSM 900 service to its offerings.
Robert Kantek, TPSA's representative in Centertel's board, admitted that TPSA had been lobbying the ministry for this. "Ideally there should be a tender for a mobile phone, then the sale of TPSA, and only then a license for long-distance operators," Kantek said.
He also said that the mobile-phone licenses could be granted to the existing operators without calling a tender. Miroslaw luniewski, the spokesman for the ministry, said that the common understanding was that the tender should be called for three licenses at the same time. "It hasn't been written anywhere, though," he said.
He could not say, however, when any of the tenders would be announced.
