NTT schools locals in tender game

By Aleksander Nowacki

NTT System, one of the largest hardware producers and distributors, is just one of the companies in the sector seeking new sources of finance. But while its competitors are looking to financial investors to cover the costs of day-to-day operations, the Warsaw-based firm plans an initial public offering (IPO) in the first half of next year as a source of finance for continued expansion.

Andrzej Kurek, NTT's chief financial officer, says the company plans to raise zł.40 million from the IPO. The company is to float 20-30 percent of its stock. The cash raised will be used to expand its product range to better exploit its distribution network.

"We want to diversify our product range," Kurek says. "The experience of our competitors shows the risks involved in relying overly on a narrow range of products." The company could sell DVD recorders or rewritable compact-disk recorders as well as computers through its network, thus exploiting economies of scale. Another avenue of expansion is opening new branches, as "diversification in space" could also bring benefits, Kurek says.

The issuance prospect preparations have already begun and the company has signed a deal with a brokerage, said to be the Kraków-based Internet Brokerage House (IDM).

The firm's fortunes form an interesting counterpoint to that of its immediate competitors, Optimus and JTT Computer.

"We have absolutely no problems with our contracts to deliver computers to schools," Kurek says referring to the problems that have led Nowy Sącz-based Optimus and JTT Computer of Wrocław to the verge of bankruptcy. The two companies are still negotiating VAT settlements with the taxman, while former Optimus CEO Roman Kluska has only recently been cleared of tax evasion charges relating to the schools delivery contracts. The turmoil caused by Kluska's arrest at gunpoint two years ago is seen as the root of the financial troubles that are still stifling the growth of the company.

The tax office is suing JTT Computer for zł.28 million in unpaid taxes in connection with the contracts. It has recently been acquired by Wrocław-based private equity firm Getin, a spin-off of a listed company by the same name. Getin hopes to settle the claims, thereby loosening the stranglehold on the computer maker.

"The public-sector contracts have accounted for an increasing share of our revenues over the recent years," says Kurek, attributing his firm's success in this field to "hard work." It remains to be seen whether NTT System, founded in Hong Kong back in 1989, can avoid the fate of its competitors.