Netia nets Millennium Comm. deal
The country's second largest fixed-line telecom operator, Netia, has announced its acquisition of Millennium Communications, a company with which its rival El-Net already has a contract to provide services to corporate clients in Warsaw.
But while news reports indicated that the deal could put a dent in El-Net's plans to continue offering telecom services to area businesses, Netia would not fully acquire Millennium until 2002 once the firm's financial results for 2001 are made known, according to the terms of the agreement.
Netia said it would purchase Millennium Communications, a Warsaw-based provider of telecommunications and technical consulting services in multi-tenant office buildings, for $20.2 million. The amount Netia pays for the firm will depend on Millennium's financial performance to the end of 2001.
Netia could finally pay less than $20.2 million if Millennium's revenue drops during the next year and a half, said Malgorzata Branska, Netia's internal communications manager. She also said the final amount paid for Millennium would depend on the dollar-to-zloty exchange rate when the deal is finalized.
The deal is also subject to the approval of both firms' supervisory boards as well as the Anti-Monopoly Office, Branska said. Millennium's main shareholder must obtain a title to transfer the company's shares to Netia, she added.
So far, Millennium has almost 13,000 telephone lines in 25 office buildings in Warsaw. The company has been growing at a rate of more than 400% a year, said Gregory Geris, president of Millennium. "The promised continued growth is the value of the company," he said.
Before the acquisition is complete, the company's deal with Netia will not affect El-Net's contract with Millennium, Geris said. Working in conjunction with Millennium, El-Net has been connecting corporate clients in Warsaw office buildings since late March. Sebastian Bartosik, El-Net's spokesman, would not disclose the number of corporate clients that El-Net has in Warsaw offices saying that such a response was difficult since "Millennium possesses our digital lines and connects cables to our network."
In May, Bartosik said El-Net had 360 corporate telephone lines in three Warsaw office buildings. Likewise, Geris of Millennium declined to comment on the number of telephone clients to whom El-Net provided services via Millennium saying it was a "sensitive time" and that the companies could only release such information jointly. El-Net will start offering fixed-line phone services to Warsaw area residents in September, Bartosik said.
Like El-Net, and its parent company telecom and power conglomerate Elektrim, Netia wants to focus on rolling out its fixed-line service in the lucrative Warsaw market, where most of Poland's corporate clients are located. Business users generate telecom revenue that is four to five times higher than residential revenue, said Andrzej Kasperek, a telecoms analyst at Erste Securities Polska.
"It was not an attempt to stop El-Net and Elektrim from delivering telecom services to Warsaw's corporate clients, but because Netia wanted to have some business clients in Warsaw and Millennium already has a network," said Branska. In late July, Netia was granted a contested license to provide local calling services in the Warsaw region, so competing directly with El-Net and the national incumbent operator Telekomunikacja Polska (TPSA).
Netia hopes to have 6,000-7,000 subscribers connected in Warsaw by the end of the year, Branska said. However, it will take one to two months before Netia can start offering services in Warsaw because TPSA must sign an interconnection agreement with Netia to allow Netia to hook into its network, she said.
When asked if Netia tried to negotiate with Millennium to acquire the company now to gain quicker access to the corporate lines, Branska said she would have to check with Netia's legal department.
Yet, El-Net and Elektrim are not concerned since the transaction is far from complete. Bartosik said the announcement of the deal would not affect El-Net's contract with Millennium or Elektrim's plans to expand its service as part of its "Warsaw project." These are the rollout of bundled service packages that combine voice telephony, cable TV, internet access and data transmission to corporate and residential clients in the Warsaw region.
When asked if Elektrim or any of its subsidiaries considered buying Millennium, Elektrim's spokeswoman Ewa Bojar refused to comment. Similarly, Geris of Millennium also declined to comment, saying that it would be "inappropriate."
But telecom analysts said once the deal is settled, El-Net could pay higher fees to Netia if El-Net continues offering phone services through Millennium. The terms of El-Net's contract could be renegotiated or changed because Netia would likely try "to maximize its benefits from being the 100% owner of Millennium," said Andrzej Kasperek, a telecoms analyst at Erste Securities Polska.
But Elektrim will wait until the completion of the deal to see if Netia as Millennium's new owner would raise fees, Bojar said. She said Millennium is still El-Net's business partner, and that only the owner had changed.
