Long-Distance Tender Rejigs Polish Telecoms Sector

Only three consortia bid for the three licences - Britain's National Grid and Polish State Railways, local phone operator Netia and BRE Bank , and the Polish Power Grid with fuel concern PKN .
Telecoms analysts had expected the licences to prompt hot competition among companies eager to add inter-city connections to portfolios of mobile and local phone interest.
But Elektrim, with a majority stake in mobile phone operator PTC and a local phone permit for Warsaw said the large number of licences and problems connecting to end-users did not guarantee appropriate returns.
Copper and silver producer miner KGHM, which has a 19.25 percent stake in mobile phone operator Polkomtel and operates 20,000 lines in western Poland via its Telefonia Lokalna subsidiary also cast doubt on the merits of the licences.
"They question the profitability of such a licence given there are three of them and the market is to open in 2001," said Eugene Klerk, telecoms analyst at ABN Amro in London.
But the licence will be a boost for companies that have or are already building long-distance networks.
Netia, the country's biggest private operator with some 220,000 lines, is building a national fibre-optic network and has a broad enough client base to justify the investment.
"Its all about generating a sufficient amount of traffic. They have that (the lines) and they also have the nationwide data transmission licence," said Stephen Pettyfer, chief equity analyst at Merrill Lynch in London.
Bidders from the two other consortia, state railways PKP and the Power Grid's Tel Energo, also already have modern fibre optic networks.
NEW TELECOMS LAW TO CUT LICENCE ADVANTAGE
The licences are part of Poland's drive to free its telecoms market, still dominated by state-controlled TPSA , despite the liberalisation of local and mobile connections.
Both KGHM and Elektrim said Poland's new telecoms law would free the long-distance market in 2001, saving them 23 million euro on licence fees and more in infrastructure building costs.
"One of the most important reasons for us was the short head-start of those who get the licence now," said KGHM's chief executive officer Marian Krzeminski, estimating the licence would buy just a six-month advantage over competition.
But some analysts believe the wait for the new telecoms law and a free market might be much longer.
"The law is still in a parliamentary committee," said Jan Sudol, analyst at Donaldson Lufkin and Jenrette in London.
"It may be the second half of next year before it is signed by the president and then there is a 12-month wait so the head start is likely to be 18 months or more," he said.
KGHM AND ELEKTRIM'S FINANCIAL CONCERNS
Krzeminski said KGHM was reluctant to invest in a new fixed line long-distance network because the money could be better spent on the existing long-distance back-bone network of Polkomtel, which could serve the same purpose.
Elektrim's financial problems, compounded by a legal dispute with Germany's Deutsche Telekom over a stake in PTC, would make it difficult for them to fund heavy investments.
Legal proceedings are blocking Elektrim from getting cheap capital from France's Vivendi , which it has chosen as its partner in the Polish telecomms business.
KGHM'S Krzeminski says it could still join one of the long-distance consortia, probably Tel-Energo's. Elektrim could resurface as a main player once it builds its local network in Warsaw, analysts said.
"There nothing to stop them, once they have the local base, from working with others that have the infrastructure," said Merrill's Pettyfer.